7. According to the Announcement Universal has invested substantial amounts of capital implementing a click & collect service. The service is now fully operational and there is debate among management about whether the $900,000 investment in this service should be classified as a tax-deductible expense in 2021.

11. Starting in 2022, employees at the Rouse Hill store will receive annual training. Universal performs all training in-house using a dedicated facility that was established in 2020. The facility has an annual budget of $655,000 and inducts new employees in all aspects of the retail industry. Ordinarily, Universal would charge an arms-length amount of $75,000 per annum for staff training. However, the training division has sufficient spare capacity to train the Rouse Hill stores employees without the facility incurring any additional costs. The accounts department recommends internally invoicing the $75,000 training expense to the Rouse Hill store each year.

12. For taxation purposes the new building has a twenty-five-year life. However, Universal will perform the financial analysis of the Rouse Hill store over a ten-year period. The new store requires $300,000 of fixture and fittings (F&F). The ATO states that F&F have a six-year effective life. In Universals experience, F&F can be operated effectively for a full ten years before they need replacing. Universals management accountants depreciate all assets over an operational five-year life.

13. Universal will borrow $400,000 today to finance the Rouse Hill store. The ten-year interest-only loan has annual interest repayments of $16,000 (assuming a 4% p.a. rate). Universals accountant confirms that interest payments are classified as a business expense and are therefore tax deductible.

14. Universal assumes that the Rouse Hill building can be sold for $1,500,000 in the year 2031. At any point in time the resale value of the F&F is $22,000. ATO regulations state that all non-current assets are depreciated to zero.

15. If Universals directors approve the Rouse Hill store it will require $200,000 of inventory, taking Universals total inventory figure to $5.9 million. The accounts receivable balance will increase from the current level of $4.1 million to $4.7 million. Accounts payable will remain at $6.2 million whether the new store proceeds or not.

16. Universal has a required rate of return of 8%. Assume the company tax rate will remain at 30%.

What is the cash flows over the life?