Question: Hello, I am getting stumped on this question; You are thinking of opening an internet coffee shop and estimate the following cash flows. The cost

Hello, I am getting stumped on this question;

You are thinking of opening an internet coffee shop and estimate the following cash flows. The cost of the establishment is $1.200,000 for the building and $250,000 for equipment. The business will earn $842,000 per year in revenue and have cash expenses of $538,000 per year during its five years of operation. Depreciation on the building and equipment will be $80,000 per year.At the end of five years you expect to sell the coffee shop for an after-tax cash disposition value of $600,000.No other cash flows will occur during the 5 years of operation. Using a 25 percent tax rate, and a 9 percent cost of money, what is the net present value of this business?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!