Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please help 12. You are provided a chart representing the cash flows expected from a coffee shop project in a retail store. You remember from

please help
image text in transcribed
12. You are provided a chart representing the cash flows expected from a coffee shop project in a retail store. You remember from your finance course that only incremental cash flows should be included in the chart as relevant items for capital budgeting decision. When you examine the chart, you have noted the following points. (10p) a. Comment on each as relevant or not and, b. briefly explain why in one or two sentences. The coffee shop project chart includes expected revenue increase in retail store due to opening of the planned coffee shop. The retail store owner first wanted to initiate this project two years ago and spent 100.000 Lira for a market research and feasibility report. The invoice is already paid. The chart includes this item as Initial Cash Outflow. The project uses an empty corner in the retail store. The space is currently not rented to anyone, thus no income is generated. However, it is estimated that 2.000 Lira rental income could be generated if rented. The chart includes this figure as cash outflow. 50% of the project's initial outlay will be financed by bank loan. The chart includes the costs interest) of this loan. The current overhead costs for the retail store (electricity, heating, security, etc.) is 5.000 Lira per month. The new project will not cause an increase in these costs. However, since 20% of the store space will be allocated for the coffee shop project, the accountant decides to allocate 1.000 TL (20%) of the said expenses to the new project, once it starts to operate. These expenses are included in the chart as cash outflow

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored 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

Recommended Textbook for

Financial Accounting Reporting, Analysis And Decision Making

Authors: Shirley Carlon

6th Edition

0730363279, 9780730363279

More Books

Students also viewed these Accounting questions

Question

Show that converges if|x| 00 n n=1

Answered: 1 week ago