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Question 2 (50 points): Lillian is considering using some of the cash generated from her mail-order business to open a retail store. The fixed investment
Question 2 (50 points): Lillian is considering using some of the cash generated from her mail-order business to open a retail store. The fixed investment in the store is expected to be $3.5 million. This investment can be depreciated straight line over five years. Variable costs are estimated to be 35% of sales. The tax rate is 0%. Cash fixed costs total $600,000 per year. a) What is the cash flow breakeven point (in sales $) of the venture during the first five years? What is it after the fifth year? b) What is the net income breakeven point in sales $) during the first five years? What is it after the fifth year
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