A retailer is considering whether to open a new shop on a vacant block of land it owns. If the company goes ahead with the project, it will construct a new building at a cost of $2,900,000. It will also incur additional expenses of $489,000. The tax office has ruled that the building can be depreciated straight-line over 10 years, but the additional expenses are immediately tax-deductible. The land was purchased ten years ago at a cost of $769,000 and is worth $11,939,000 today. Setting up the new shop will require inventory of $203,000. 

What is the initial cash flow of the project, if the corporate tax rate is 30%?

Answer rating: 100% (QA)

To calculate the initial cash flow of the project we need to consider the costs and the tax implicat... View the full answer