6) You are a 50/50 partner in a BBQ restaurant. Your business partner, who majored in...
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6) You are a 50/50 partner in a BBQ restaurant. Your business partner, who majored in English Literature, wants to invest in a new, larger, more efficient smoker. Including delivery, the new smoker costs $19,000 (paid today, year 0). According to your partner's calculations, the new smoker would generate annual cash savings, including labor, raw materials, and tax savings due to depreciation of $6,000/year for the next 5 years (starting in year 1). In his words, "This new BBQ smoker will save us $30,000 over five years, and only costs us $19,000! That's $11,000 in profit!" Obviously, since you're taking FINA 363, you recognized his flawed logic. However, you still need to run the numbers. What is the NPV of the new smoker? The applicable discount rate is 15%. a. $-1,591.38 b. $-134.62 c. S+1,112.93 d. $ +1,760.78 6) You are a 50/50 partner in a BBQ restaurant. Your business partner, who majored in English Literature, wants to invest in a new, larger, more efficient smoker. Including delivery, the new smoker costs $19,000 (paid today, year 0). According to your partner's calculations, the new smoker would generate annual cash savings, including labor, raw materials, and tax savings due to depreciation of $6,000/year for the next 5 years (starting in year 1). In his words, "This new BBQ smoker will save us $30,000 over five years, and only costs us $19,000! That's $11,000 in profit!" Obviously, since you're taking FINA 363, you recognized his flawed logic. However, you still need to run the numbers. What is the NPV of the new smoker? The applicable discount rate is 15%. a. $-1,591.38 b. $-134.62 c. S+1,112.93 d. $ +1,760.78
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Related Book For
Auditing An International Approach
ISBN: 978-0071051415
6th edition
Authors: Wally J. Smieliauskas, Kathryn Bewley
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