What are the cash flows from year 1 to year 10

13. Universal will borrow $400,000 today to finance the Rouse Hill store. The ten-year interest-only loan has annual interest repayments of $16,000 (assuming a 4% p.a. rate). Universals accountant confirms that interest payments are classified as a business expense and are therefore tax deductible.

14. Universal assumes that the Rouse Hill building can be sold for $1,500,000 in the year 2031. At any point in time the resale value of the F&F is $22,000. ATO regulations state that all non-current assets are depreciated to zero.

15. If Universals directors approve the Rouse Hill store it will require $200,000 of inventory, taking Universals total inventory figure to $5.9 million. The accounts receivable balance will increase from the current level of $4.1 million to $4.7 million. Accounts payable will remain at $6.2 million whether the new store proceeds or not.

16. Universal has a required rate of return of 8%. Assume the company tax rate will remain at 30%.