Question
Five Below is a very successful value retailer. Although they do really well in skincare and cosmetics, they have made little attempts at Hair Care.
Five Below is a very successful value retailer. Although they do really well in skincare and cosmetics, they have made little attempts at Hair Care. Please use the following criteria to determine expansion into this area will be meaningful to their business. It's best if the model be built on only year one to determine if this seems like a worthwhile initiative.
Introduce 8 ft of Hair Care Products into all 900 stores.
Additional fixturing costs of $125k per store, fixtures will have a useful life of five years. For the purpose of the model and the fact that you are being asked to model just one year, please use 1/5 of this number.
Additional inventory per store is $16k and should remain steady throughout the year
Anticipating additional sales of $24k per store per month.
Additional advertising expense to drive awareness to the brand is $50/store per month.
They believe they can attract a new, younger customer from this experiment.
They believe this will make them a more relevant competitor in the beauty space.
Question
Is this investment a good financial decision: Explain your answer. | |||
Can the cost of the fixturing be capitalized? Explain your answer. | |||
Are annualized expenses such as advertising Cap Ex or Op Ex? | |||
The increase in revenue in the category would appear on which financial statement? | |||
The increase in inventory for this inititive would appear on which financial statement? | |||
Do the intangible benefits of a more relevant competitor appear on the financial statements? | |||
Owner equity from this initiative would appear on which financial statement? |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started