Answered step by step
Verified Expert Solution
Link Copied!

Question

00
1 Approved Answer

Natasha Brown runs a specialist food store in Portland, Oregon. The store specializes in hard-to-find food and condiments such as Milifiore Honey from Tuscany, Blue

Natasha Brown runs a specialist food store in Portland, Oregon. The store specializes in hard-to-find food and condiments such as Milifiore Honey from Tuscany, Blue Stilton Cheese from England, and so on. The store keeps an inventory that, valued at cost, is approximately $1.2 million. The store generates average sales of $2 million per year, with an operating margin of 8% (after tax). News about her excellent foods has spread, and Natasha is considering opening an online retail option for the limited selection of the most popular products. Many of these products are sourced from around the world and involve long lead times. Natasha would need to order a number of these items in advance to make sure she has adequate supplies. She estimates that the online channel can generate an additional $400,000 in sales. She would have to spend about $150,000 upfront to build a robust online store website. (She estimates that the cost of capital for a small business like hers is about 15%.) Natasha also expects the operating margins from the business to be the same as her existing business. Assuming that additional sales from the online channel will be sustained for the foreseeable future (in perpetuity), is this project worth undertaking?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions

Question

3 > O Actual direct-labour hours Standard direct-labour hours...

Answered: 1 week ago