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Answer each subquestion with workings and show it . You are the president of Lion Pride Inc. and considering adding a second location at Venice
Answer each subquestion with workings and show it
You are the president of Lion Pride Inc. and considering adding a second location at Venice
Beach. You estimate the new location will cost $ to build and will result in $ of annual revenues and $ of operating costs each year, for eight years. The new building will be depreciated using the year MACRs rates, and you estimate it will be sold after eight years for $ Alternatively, you have an offer from a potential buyer to purchase the land for $ tomorrow. Lion Pride Inc. is subject to a tax rate and can finance this project at
a What are the periodic cash flows
associated with the project?
b Based on the NPV rule, should you commence with the building plan?
C Based on the IRR rule, should you commence with the building plan?
d If management determines the project is viable only if it has a discounted payback of less than or equal to six years, should you commence with the building plan?
e What is the expansion's profitability index?
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