In fiscal 2007, Circuit City invested $242 million in capital expenditures, including $108 million related to store

Question:

In fiscal 2007, Circuit City invested $242 million in capital expenditures, including $108 million related to store relocations, remodeling, and new store construction. Assume that these projects have a seven-year life and that management requires a 15% on those projects.
Required
1. What is the amount of annual cash flows that Circuit City must earn from those store-related projects to achieve a 15% (Hint: Identify the 7-period, 15% factor from the present value of an table and then divide $108 million by the factor to get the annual cash flows required.)
2. BTN 11-1 must be completed to answer part 2. How does your answer to part 1 compare to Best Buy’s required cash flows determined in BTN 11-1? What does this imply about each company’s cash flow requirements for these types of projects?

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