Question
You are considering opening a gas station at a nice neighborhood. Suppose the following assumptions are true: 1. Inital investment cost = $625,000 2. Initial
You are considering opening a gas station at a nice neighborhood. Suppose the following assumptions are true:
1. Inital investment cost = $625,000
2. Initial increase in net working capital = $20,000
3. Annual sales starting from year 1 = $175,000
4. Annual maintenance expense starting from year 1 = $45,000
5. Straight line depriciation to zero with a useful life of 25 years
6. Plan to run the gas station for 5 years
7. 70% of net working capital retrieved at end of year 5
8. Can sell the gas station for $380,000 after 5 years
9. Tax rate =21%
10. Cost of Capital = 15%
WHAT WILL BE YOUR FREE CASH FLOW IN YEAR 5?
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