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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
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
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