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A traditional bakery currently has four branches a, b, c and d. The financial manager is considering opening another branch, so he would have
A traditional bakery currently has four branches a, b, c and d. The financial manager is considering opening another branch, so he would have to rent space and purchase the necessary equipment. The new equipment and installation of the accessories will cost $200,000 and a salvage value of these accessories is expected to be $10,000 after 10 years. These assets are expected to be depreciated on a straight-line basis over the next five years until reaching a value of zero. The manager also estimates that the new store will need an initial net working capital of $60,000. In 2023, 850,000 people visited part of the branch, the financial manager estimates that of these visitors, 14% of them will consume during the first year in the new store, with an average expenditure of $9 per person, the manager projects that these sales will will increase at an annual rate of 8% over the next 10 years, operating expenses are considered. (Depreciation is not included in these expenses) they will be $700,000 during the first year, due to the increase in the cost of water, electricity, gasoline and inflation, these expenses are expected to increase at a rate of 7% during the next 10 years. If the marginal tax rate is 40%, find the new branch's net investment and cash flows for the next 10 years.
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