1. Dougs Doughnuts and Gourmet Coffee is considering a new store location. For accounting purposes, fixed annual operating costs for a store are $118,500 a year, and variable costs are 24 percent of sales and taxes are 20% of pretax income. The average sale for each customer is a doughnut and coffee which cost the customer $5.25. The annual net income break-even level of sales (in number of customers) for this store location is _______.

2.Teresas Tanning Salon expects annual sales of $175,000, annual fixed cash outlays are $57,000 a year at each location, variable cash outlays are 22 percent of sales, depreciation is $15,000 per year, and taxes are 32% (of pretax income). Initial outlay for the building is $140,000. The company does its analysis based on a 10-year store life. We believe the business can be sold for $100,000 after taxes (disposal value) at the end of its 10 year lifer. Using an 10% required return, what is the net present value of this venture?

3. Please rework the prior problem to determine what annual sales volume is needed to generate a net present value of $0? To do this you will need to review the problem in the book and its excel answer. If you do not know how to do a goal seek in excel please consult the help menu or google or other sources (there are many). Remember -- you will need to calculate the net present value in the traditional way first. When you do this you need to make sure that the second year sales references the first year ( plus first year in the formula) You will then need to click on the data tab to access thewhat if box and then click on the goal seek box. To use this function, you will set the npv cell to zero by changing the sales cell in the first year.