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Sarah has been working with a small travel agency for the past few years to learn the business and to better understand what costs are
Sarah has been working with a small travel agency for the past few years to learn the business and to better understand what costs are necessary to run it. Now, having been in the business world for a few years, she's ready to start her own travel agency, specializing in "off the grid" locations. She knows there will be both overhead costs and labor costs, since she intends to hire one assistant. The following chart outlines her estimates thus far. As a new business owner, Sarah only expects to earn a 5\% rate of return. She conducted an initial NPV anlaysis for an 8-year interval, recognizing that she'll make some significant adjustments after that point. Her initial analysis revealed a positive NPV. Rerun the NPV analysis for Sarah. Did she correctly determine a positive NPV related to her investment for this 8-year period? State the NPV amount. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to 2 decimal places e.g. 5,125.36. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) NPV $ Sarah's calculations were Your answer is incorrect. Since Sarah's primary goal is not to make an exorbitant profit, how low could her annual net operating cash flows be and still generate a 5\% return (i.e., a zero NPV)? State this annual amount in before-tax dollars. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to 2 decimal places e.g. 5,125.36.) Before-tax annual net operating cash flow $ If she expects to provide services to about 50 customers, how much would she need to profit per customer before-tax? (Round answer to 2 decimal places e.g. 5,125.36.) Annual operating cash flows per customer before-tax $ per customer
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