Question: Please use the net present value table to calculate the present value John Candy has recently written a business plan to open a chocolate shop

Please use the net present value table to calculate the present valuePlease use the net present value table to calculate the present value

John Candy has recently written a business plan to open a chocolate shop in Kamloops, British Columbia. John estimates that he will need $195,000 to equip the store and an additional $78,500 for inventory and working capital. He has identified a store that is available for rent and the annual cost will be $35,000 per year. John's cash flow forecast in his business plan estimates that the annual cash inflow from the business will be to $127,000. Other annual operating costs are expected to amount to $42,750. John plans to operate the chocolate shop for six (6) years. The equipment and other capital assets could be sold in seven (7) years for 15% of their original cost. The working capital will be fully released for other purposes after seven (7) years. John used a discount rate of 14% in his business plan. REQUIRED: Use the net present value method to determine the net present value of this project. Would you advise John to make this investment? Explain why or why not

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!