Assume a company is considering investing in opening a new store. The following assumptions are made: *
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Question:
Assume a company is considering investing in opening a new store. The following assumptions are made:
Furniture, fixtures, and leasehold improvements will cost $ Company will spend $ to purchase inventory for the grand opening. Company already spent $ in consulting fees.
Company expects to sell units each year for the next six years at an average $ sales price per unit and an average $ variable cost per unit. Company will incur $ in fixed operating costs each year.
Furniture, fixtures, and leasehold improvements will depreciate on an accelerated basis for tax purposes using a year MACRS asset life.
Company expects to switch to a different location six years from now and sell the furniture and fixtures for $ before tax and sell through the remaining inventory.
Company's tax rate will be
What is the incremental free cash flow the investment is expected to generate in year that should be considered for capital budgeting purposes?
Do not round intermediate calculations. Round your final answer to the nearest whole dollar ie Do not include commas or a dollar sign with your answer.
Hint: You will need OCF, net working capital, and capital spending cash flows.
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