Hi, I have a few questions Market Testing JB Hi Fi has already spent (and expensed) $0 8 million on a market study which has provided JB Hi Fi with a sense of the magnitude of this market, and JB Hi Fi's potential in the market Is $0 8 million consider as an expense for 13 years (Assuming there are 13 years) JB Hi Fi stores chosen for conversion have been poorly performing stores they are expected to each generate, on average, $0 8 million in after tax operating income each year if they remain as traditional JB Hi Fi stores What does this mean Side Benefits If JB Hi Fi opens the home hardware stores, there is the potential for a spill over benefits with its existing stores, where customers from the home hardware stores increasing sales at JB Hi Fi's existing stores JB Hi Fi expects to generate about $10 million in additional revenues at its existing stores in in year 2, growing at the inflation rate (2 ) for as long as the home hardware stores continue in operation J B Hi Fi expects to generate the same EBIT to Revenue margin on these revenues as it did on its revenues in the fiscal year ended June 2019 (in Exhibit 1) Would it be, for example, Revenue for year 2 is $4 million, so Revenue now will be ($4 million $10 million), then if Revenue for year 3 is $5 million, Revenue now will be ($4 million $10 million) x (1 2 ) And what exactly does the underlined part mean Exhibit 1 Income Statements for JB Hi Fi ($ amounts are in millions) 06 15 06 16 06 17 06 18 06 19 Revenue $3652 77 $3955 01 $5630 00 $6855 40 $7097 70 Operating Expenses $3411 07 $3691 79 $5268 00 $6443 20 $6669 40 EBITDA $241 70 $263 23 $362 00 $412 20 $428 30 Depreciation and Amortisation $39 12 $40 90 $53 90 $60 40 $54 70 EBIT $202 58 $222 32 $308 10 $351 80 $373 60 Interest Expense $5 93 $3 86 $10 70 $16 60 $14 30 EBT Excl Abnormals $196 65 $218 47 $297 40 $335 20 $359 30 Tax Expense $59 02 $65 66 $86 80 $101 30 $109 50 Net Income Before Abnormals $137 63 $152 81 $210 60 $233 90 $249 80 Abnormals $1 12 $ 63 $38 20 $ 70 $ 00 Net Income After Abnormals $136 51 $152 18 $172 40 $233 20 $249 80

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Hi, I have a few questions: Market Testing: JB Hi Fi has already spent (and expensed) $0.8 million on a market study which has provided

Hi,

I have a few questions:

Market Testing: JB Hi Fi has already spent (and expensed) $0.8 million on a market study which has provided JB Hi Fi with a sense of the magnitude of this market, and JB Hi Fi's potential in the market.Is $0.8 million consider as an expense for 13 years? (Assuming there are 13 years)
JB Hi Fi stores chosen for conversion have been poorly performing stores; they are expected to each generate, on average, $0.8 million in after-tax operating income each year if they remain as traditional JB Hi Fi stores.What does this mean?
Side Benefits: If JB Hi Fi opens the home hardware stores, there is the potential for a spill over benefits with its existing stores, where customers from the home hardware stores increasing sales at JB Hi Fi's existing stores. JB Hi Fi expects to generate about $10 million in additional revenues at its existing stores in in year 2, growing at the inflation rate (2%) for as long as the home hardware stores continue in operation. JB Hi Fi expects to generate the same EBIT to Revenue margin on these revenues as it did on its revenues in the fiscal year ended June 2019 (in Exhibit 1).Would it be, for example, Revenue for year 2 is $4 million, so Revenue now will be ($4 million + $10 million), then if Revenue for year 3 is $5 million, Revenue now will be ($4 million + $10 million) x (1+2%)? And what exactly does the underlined part mean?

Exhibit 1: Income Statements for JB Hi Fi ($ amounts are in millions) 06/15 06/16 06/17 06/18 06/19 Revenue $3652.77 $3955.01 $5630.00 $6855.40 $7097.70 Operating Expenses -$3411.07 -$3691.79 -$5268.00 -$6443.20 $6669.40 EBITDA $241.70 $263.23 $362.00 $412.20 $428.30 Depreciation and Amortisation $39.12 -$40.90 -$53.90 -$60.40 -$54.70 EBIT $202.58 $222.32 $308.10 $351.80 $373.60 Interest Expense -$5.93 -$3.86 -$10.70 $16.60 -$14.30 EBT Excl Abnormals $196.65 $218.47 $297.40 $335.20 $359.30 Tax Expense -$59.02 -$65.66 -$86.80 -$101.30 -$109.50 Net Income Before Abnormals $137.63 $152.81 $210.60 $233.90 $249.80 Abnormals -$1.12 -$.63 -$38.20 -$.70 $.00 Net Income After Abnormals $136.51 $152.18 $172.40 $233.20 $249.80