You and your business partners are considering applying for a franchise. If approved, you expect startup costs to be $1577928. In equipment that is depreciable on a seven-year MACRS schedule. Your plan is to start and operate the business for 6 years at the end of which time you expect to sell the business for $1577928 plus $200,000. You expect to have initial working capital needs of $30,000, but these needs will remain proportionate to sales (they will grow at the same rate as sales grow0. You expect sales in the first year to be $300,000 and that sales will grow by 15% per year. You project annual fixed operating expenses of $75,000 in the first year. These fixed expenses will grow by 5% per year. Your annual variable operating expenses are expected to be 40% of sales.

You expect to pay taxes of 21%. Assume your required return is 8%. Should you apply for a Guthries Franchise? Prepare a report responding to the following prompts:

A.) Estimate the total cash flows for this opportunity. Explain your estimates in your report. Again, your calculations must be done within Excel using appropriate formulas and cell references.