Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

ane owns a flower shop. Business has been very good. She has the opportunity to expand her business one of two ways: For $ 7

ane owns a flower shop. Business has been very good. She has the opportunity to expand her business one of two ways:
For $75,000 she can open a new store. She will use a 8% loan to finance 100% of this project. She expects to need an additional $20,000 up front to purchase inventory and other working capital items. She will operate the store for 3 years and will sell it for $100,000 at the end of year 3, at which time she will recover her working capital. She expects to make cash of $4,000 in year 1,$5,000 in year 2 and $10,000 in year 3 before selling this new store.
For $50,000 she can oppen a web site retail business. She will finance this with a 12% loan. It is a higher rate as it is not secured by real estate. She will not need any additional working capital to start this business. She expects to make 5,000 in year 1,$6,000 in year 2,$7,500 in year 3 and $10,000 for years 4-7. At the end of year 7 she expects to sell his business for $100,000.
All amounts presented are after tax/interest payments. Using Excel, prepare a statement showing investment and cash flows by year. Calculate the NPV and IRR for each of these projects. Write a recommendation as to which project she should pursue and support this with information from your calculations. She cannot due both projects.
Can someone help me start this case study or if someone start rhe excel portion? Thank you
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Institutions And Markets

Authors: Jeff Madura

10th International Edition

0538482176, 9780538482172

More Books

Students also viewed these Finance questions