Thanks for helping Issy to open her first store and make the necessary adjustments.Issy is excited about the opportunity this store has presented to her.She now wants to open five additional stores for which she has identified sights in the greater metro area. Her quandary is whether to open each new store with the available cash flows of the previous stores (thus retaining full ownership) or to accept an offer from a potential partner to fully fund the additional stores and open them right now (beginning of second year).However, the potential partner wants 40% ownership of all stores from the beginning (even store 1,retroactively).She has prepared estimated free cash flows for each option (see below, link) for each year of the ten year period, including the end of the first year.If you are comparing options bring your calculations back to the year one, since if she takes a partner all ownership will be retroactive.The cashflows given are specific to that year, meaning that the year 1 amount is that much more or less than she had in year 0 (which was 0), year 2 was how much more or less than she had in year 1, etc.In other words, that which was generated or consumed that year, they are NOT cumulative.

Do two things:

First, tell her under which option she would be financially better off and why (must submit spreadsheet and explanation).Hint:How do you compare two dissimilar cashflows over time?

Second, what are the strategic reasons she might choose one or the other option?Think of our three circles here; what resources, and competencies would she need, what market opportunities are there, what are the competitive concerns?Do not repeat any of your financial rationale.

Annual After Tax Cash FlowsYear 1Year 2Year 3Year 4Year 5Year 6Year 7Year 8Year 9Year 10

These are the additional flows broughtin each year.Issy Roles out 5 additional stores

$48,190$126,884$(77,821)$96,841$(95,664)$804,541$944,095$955,625$1,088,221$1,132,552as cash is availableIssy takes on a 40% partner and$48,190$484,601$880,595$798,514$987,963$1,029,003$1,071,697$1,147,203$1,193,937$1,242,575Starts all 5 stores the second year(She only owns 60% of these flows)