Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

without excel please You own a bagel bakery and have determined that it might be a good time to expand. The corporate tax rate is

image text in transcribed
without excel please
You own a bagel bakery and have determined that it might be a good time to expand. The corporate tax rate is 21% and the firm's weighted average cost of capital is 12%. There is an opportunity for expansion in a prime commercial store front. Preparing the store to open will cost $30,000. This includes all equipment (all capital expenditures). You will need to increase your inventory by $15,000 and your accounts payable by $5,000 immediately. You anticipate $33,000 a month of sales the first year, $35,000 in sales the second year, and $40,000 of monthly sales the third and fourth years. After the 4th year you anticipate closing the store. You have no firm plans for further expansion currently, however, you are certain that you will close this store after 4 years. Costs of goods sold will be 45% of sales. Also, you will have SG&A expenses (except for depreciation) of $10,000 per month. Your equipment will be depreciated on a 10-year straight line basis. You will sell your equipment for an estimated $15,000 when you close your store and return your inventory and accounts payable back to pre-project levels. 21) What is the net present value for your bagel bakery expansion project? 5 points

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Institutions Management A Risk Management Approach

Authors: Anthony Saunders, Marcia Cornett, Otgo Erhemjamts

10th Edition

1260013820, 978-1260013825

More Books

Students also viewed these Finance questions

Question

=+c) Is this process out of control?

Answered: 1 week ago