8. Bob’s Submarine Sandwiches expects annual sales of $180,000, annual fixed cash outlays are $51,750 a year at each location, variable cash outlays are 36 percent of sales, depreciation is $14,000 per year, and taxes are 28% (of pretax income). Opening promotion and other costs require an initial outlay of $86,000. The company does its analysis based on an 8-year store life. Bob believes the business can be sold for $110,000 after taxes (disposal value) at the end of its 8-year life. Using a 9% required return, what is the net present value of this venture?

9. Rework the prior problem to determine what annual sales volume is needed to generate a net present value of $0? Calculate the net present value in the traditional way.

Answer rating: 100% (QA)

Items Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Investment 86000 Sales 180000 1... View the full answer