Question
Bobs Submarine Sandwiches expects annual sales of $180,000, annual fixed cash outlays are $51,750 a year at each location, variable cash outlays are 35 percent
Bobs Submarine Sandwiches expects annual sales of $180,000, annual fixed cash outlays are $51,750 a year at each location, variable cash outlays are 35 percent of sales, depreciation is $14,000 per year, and taxes are 28% (of pretax income). Opening promotion and other costs require an initial outlay of $66,000. The company does its analysis based on a 8-year store life. Bob believes the business can be sold for $110,000 after taxes (disposal value) at the end of its 8 year lifer. Using a 9% required return, what is the net present value of this venture?
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