QUESTION 3 [ 28] THE COFFEE CLUB celebrates almost three decades of really good food , great service and excellent coffee . It manages 400 stores throughout & countries , with upwards of 40 million dedicated customers . THE COFFEE CLUB has identified Westfield Parramatta and Sunshine Marketplace as two possible locations for a new Wimpy franchise given the considerable growth in the local economy . The cost of the feasibility study amounted to $30 000 . Assume that you are the capital budgeting manager of THE COFFEE CLUB and have been assigned to this project . Consider the following information and calculate the relevant cash flows for the two mutually exclusive locations . The coffeehouses will have the same serving capacity , i.e . they are the same size . The cost of kitchen and restaurant equipment will amount to $600 000 . Installation cost will amount to $25 000 . The change in net working capital is $90 000 . Although THE COFFEE CLUB operates as a franchise , they still consider operating cash flows before setting up a new franchise to ensure the maximum profitability . Annual sales in Westfield Parramatta is expected to be $1 . 4 million and $900 000 in Sunshine Marketplace . THE COFFEE CLUB franchisee will rent suitable premises to house the coffeeshop . In Westfield Parramatta the annual rent will amount to $200 ,0no whereas the annual rent in Sunshine Marketplace will be slightly less , namely $170 000 . Operating expenses ( excluding depreciation ; will amount to $500 000 p . a. for Westfield Parramatta and $450 000 p. a. for Sunshine Marketplace