Question
Monica is considering opening a nail salon. It would require a $50,000 initial investment which would be straight line depreciated over the life of the
Monica is considering opening a nail salon. It would require a $50,000 initial investment which would be straight line depreciated over the life of the business which is 5 years. Annual fixed costs are $12,000. Variable costs are her own labor and some materials at $12 per customer and she will charge $25 per customer. She estimates she will see 2000 customers per year. The tax rate is 21% and the required rate of return is 5%. A. Find the OCF B. Find the NPV and decide C. Find the IRR and decide D. Find the NPV and IRR if estimates of price, quantity, variable and fixed costs are all 10% worse. E. Going back to original estimates, find the NPV break even number of customers.
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