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C-13 q-9 Need help with all 2 parts Working capital and capital budgeting Farbuck's Tea Shops is thinking about opening another tea shop. The incremental

C-13 q-9 Need help with all 2 parts

Working capital and capital budgeting Farbuck's Tea Shops is thinking about opening another tea shop. The incremental cash flow (not including the working capital investment) for the first five years is as follows:Click on the icon in order to copy its content into a spreadsheet

Initial capital

cost=$3,500,000

Operating cash flow for each

year=$1,000,000

Recovery of capital assets after five

years=$240,000

The hurdle rate for this project is 10%. If the initial cost of working capital is $490,000 for items such as teapots, teacups, saucers, and napkins, should Farbuck's open this new shop if it will be in business for only five years? What is the most it can invest in working capital and still have a positive net present value?

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