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Suppose a company is considering a new store in another state. The cost of opening the store would be $200,000. It would also cost another

Suppose a company is considering a new store in another state. The cost of opening the store would be $200,000. It would also cost another $70,000 annually in additional costs, and the expected revenues are $150,000 per year. For accounting purposes, they are able to depreciate the cost of their equipment using the straight line method using a value of $50,000 over five years. This is when management expects to close down the store, and the equipment would have a residual value of $20.000. Step #1 set up a spreadsheet, and calculate the I0, annual after tax savings (in this case, revenue), the depreciation savings assuming a 25% tax rate, and the terminal cash flow. Step #2, calculate the payback period, the NPV, and the PI and the IRR. Explain according to each of these measures, should they the company open this store if the RRR is 12%

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