You have just completed a $24,000 feasibility study for a new coffee shop in some retail space you own. You bought the space two years ago for $101,000, and if you sold it today, you would net $116,000 after taxes. Outfitting the space for a coffee shop would require a capital expenditure of $30,000 plus an initial investment of $4,600 in inventory. What is the correct initial cash flow for your analysis of the coffee shop opportunity? Identify the relevant incremental cash flows below: (Select all the choices that apply.) A. Amount you would net after taxes should you sell the space today. B. Initial investment in inventory. C. Feasibility study for the new coffee shop. D. Capital expenditure to outfit the space. E. Price you paid for the space two years ago. Calculate the initial cash flow below: (Select from the drop-down menus and round to the nearest dollar.) $ $ $ $ 1 2 3 4 Free Cash Flow

You have just completed a $24,000 feasibility study for a new coffee shop in some retail space you own. You bought the space two years ago for $101,000, and if you sold it today, you would net $116,000 after taxes. Outfitting the space for a coffee shop would require a capital expenditure of $30,000 plus an initial investment of $4,600 in inventory. What is the correct initial cash flow for your analysis of the coffee shop opportunity? Identify the relevant incremental cash flows below: (Select all the choices that apply.) A. Amount you would net after taxes should you sell the space today. B. Initial investment in inventory. C. Feasibility study for the new coffee shop. D. Capital expenditure to outfit the space. E. Price you paid for the space two years ago. Calculate the initial cash flow below: (Select from the drop-down menus and round to the nearest dollar.) $ $ $ $ 1 2 3 4 Free Cash Flow

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

YOU ARE A FINANCIAL ANALYST FOR A COMPANY THAT IS CONSIDERING A NEW PROJECT. IF THE PROJECT IS ACCEPTED, IT WILL USE A FRACTION OF A STORAGE FACILITY THAT THE COMPANY ALREADY OWNS BUT CURRENTLY DOES NOT USE. THE PROJECT IS EXPECTED TO LAST 10 YEARS, AND THE ANNUAL DISCOUNT RATE IS 10% (COMPOUNDED ANNUALLY). YOU RESEARCH THE POSSIBILITIES, AND FIND THAT THE ENTIRE STORAGE FACILITY CAN BE SOLD FOR €100,000 AND A SMALLER (BUT BIG ENOUGH) FACILITY CAN BE ACQUIRED FOR €40,000. THE BOOK VALUE OF THE EXISTING FACILITY IS €60,000, AND BOTH THE EXISITING AND THE NEW FACILITIES (IF IT IS ACQUIRED) WOULD BE DEPRECIATED STRAIGHT LINE OVER 10 YEARS (DOWN TO A ZERO BOOK VALUE). THE CORPORATE TAX RATE IS 40%. DISCUSS WHAT IS THE OPPORTUNITY COST OF USING THE EXISTING STORAGE CAPACITY?
Herky Foods is considering acquisition of a new wrapping machine. By purchasing the machine, Herky will save money on packaging in each of the next 5 years, producing the series of cash inflows shown in the following table: The initial investment is estimated at $1.46 million. Using a 9% discount rate, determine the net present value (NPV) of the machine given its expected operating cash inflows. Based on the project's NPV, should Herky make this investment? The net present value (NPV) of the new wrapping machine is $. (Round to the nearest cent.)
Hi. I need an understanding of how to calculate a projects net investments and cash flows. The image is attached.
Pinder Co., Ltd. is considering investing $500, 000 to build a factory to produce electric bicycles. Pinder Co., Ltd. has signed a contract with a large retailer that guarantees that Pinder Co., Ltd. will get $50 for every bicycle sold, in addition to all production - related costs. This means that the annual cash flow generated by the production of bicycles will be $50 multiplied by the number of bicycles sold. In exchange for this guarantee, the retailer will take over the factory at a price of $200, 000 in five years. Pinder Co., Ltd. is expected to sell 7, 000 bicycles every year in the next five years. Assume that the discount rate of Pinder Co., Ltd. is 10%. How much do the sales of bicycles need to be reduced before this project reduces the wealth of the shareholders of Pinder Co., Ltd. ?
You have just completed a $15,000 feasibility study for a new coffee shop in some retail space you own. You bought the space two years ago for $96,000, and if you sold it today, you would net $114,000 after taxes. Outfitting the space for a coffee shop would require a capital expenditure of $35,000 plus an initial investment of $5,500 in inventory. What is the correct initial cash flow for your analysis of the coffee shop opportunity?
You are considering a new product line for your business. The new product line will require investment of $3,000,000 in new equipment. The equipment will be trucked to your facility at a cost of $25,000 and will require another $250,000 to modify that equipment for use in your facility. The new product line will require an increase in inventory of $200,000, an increase in accounts receivable of $100,000, but you believe you will be able to get suppliers to offer good credit terms which should increase accounts payable by $250,000, and you will obtain a short term bank loan, increasing notes payable by $25,000. The equipment falls into the 3- year MACRS class (rates of 33%, 45%, 15%, and 7% in years 1-4, respectively). You expect to operate the new product line for only three years and then shut down operations. The salvage value of the equipment at time three is expected to be $385,000. The new product line is expected to lead to sales of $1.4 million the first year with inflation of…
You have a chance to invest in a shopping center. The total investment for the purchase of the land and construction of the center is $10,000,000 today. You have calculated the yearly net after tax cash flows from operations as follows: Year 1: $1,500,000 Year 2: 2,000,000 Year 3: 2,250,000 Year 4: 2,500,000 Year 5: 2,750,000 At the end of year 5 you will sell the shopping center for $18,000,000 after taxes. Required: |+ Use the provided Excel spreadsheet to calculate the present value of all the operating after-tax cash flows and the total cash flows for the project assuming you require an 20% R.O.I. Use the attached "PRESENT VALUE TABLE" for your calculations:
second screenshot shows the options to fill in the blanks

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS