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Explain in detail Jane owns a flower shop. Business has been very good. She has the opportunity to expand her business one of two ways:
Explain in detail
Jane owns a flower shop. Business has been very good. She has the opportunity to expand her business one of two ways: 1. For $50,000 she can open a new store. She will use a 8% loan to finance 100% of this project. She expects to need an additional $10,000 up front to purchase inventory and other working capital items. She will operate the store for 3 years and will sell it for $80,000 at the end of year 3 , at which time she will recover her working capital. She expects to make $1,500 in year 1,$2,000 in year 2 and $3,000 in year 3 before selling this new store. 2. For $75,000 she can open 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 47. 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 projectsStep by Step Solution
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