Question
A food chain company is experiencing a capacity shortage problem, being very famous brand of fast food. The company is planning to open a new
A food chain company is experiencing a capacity shortage problem, being very famous brand of fast food. The company is planning to open a new outlet in Sohar, which would require initial investment of $ 220,000. Information on the expected revenues and costs (salaries of staff, rent and other expenses) for next years is given below:
Year | Expected revenue ($) | Expected Annual Costs ($) |
2020 | 64000 | 21000 |
2021 | 76000 | 24000 |
2022 | 85000 | 26000 |
2023 | 94000 | 30000 |
2024 | 108000 | 32000 |
2025 | 102000 | 36000 |
2026 | 116000 | 41000 |
The applicable interest rate is 9% per annum and it is compounded annually.
a) Prepare a cash flow diagram for the given data.
b) Compute the NPW of the future cash flows.
c) Compute the FW at the end of 2026 of given cash flows.
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