A store will cost $600,000 to open. Variable costs will be 44% of sales and fixed costs are $100,000 per year. The investment costs will be depreciated straight-line over the 7 year life of the store to a salvage value of zero. The opportunity cost of capital is 8% and the tax rate is 30%.

Find the operating cash flow each year if sales revenue is $950,000 per year.

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Correct response: 328,114.2910

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Using an operating cash flow of 328,114.29, calculate the Net Present Value. Should the store be opened?

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Do NOT open store

Open store

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