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you are considering opening a store. the following are true. initial investment cost = $625,000 initial increase in net working capital = $20,000 annual sales
you are considering opening a store. the following are true.
initial investment cost = $625,000
initial increase in net working capital = $20,000
annual sales starting from year 1 = $175,000
annual maintenance expense starting year 1= $45,000
straight line depreciation to zero with useful life of 25 years
plan to run store for five years
70% of networking capital retrieved at the end of 5
can sell store for $380,000 after 5 years
tax rate = 21%
cost of capital = 15%
1.) if you open the store what will be free cash flow in years 0~4?
2.)what is free cash flow in year 5
3.) should you open the store why or why not
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