Question
A retailer is considering opening a new store as a business venture. The purchase price of the store will be $2 million and there will
A retailer is considering opening a new store as a business venture. The purchase price of the store will be $2 million and there will be a further investment required of $0.5 million six months after purchase.
The store will open one year after purchase. Revenues less running costs are expected to occur continuously and will be $0.1 million in the first year of operation, $0.15 million in the second year of operation and thereafter increasing at yearly intervals by 4.0% per annum compound.
Eight years after purchase, a major refit costing $0.8 million will be required. Sixteen years after purchase, it is assumed that the store will be closed and sold for $6 million.
The retailer requires a rate of return on its investment of 7.0% per annum effective.
Which of the following is the accumulated profit the retailer will have made at the end of the term? $867,113.1 $1,391,845.76 $1,468,794.21 $1,577,605.94 $1,696,537.16 $1,765,078.73 Correct $1,941,735.44 $1,965,730.23 $1,973,357.33 $2,212,835.82
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