Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are the CFO of SlimBody, Inc., a retailer of the exercise machine Slimbody6 and related accessories. Your firm is considering opening up a new

You are the CFO of SlimBody, Inc., a retailer of the exercise machine Slimbody6 and related accessories. Your firm is considering opening up a new store in Tempe. The store will have a life of 20 years. It will generate annual sales of 5,000 exercise machines, and the price of each machine is $2,500. The annual sales of accessories will be $600,000, and the operating expenses of running the store, including labor and rent, will amount to 50 percent of the revenues from the exercise machines. The initial investment in the store will equal $30,000,000 and will be fully depreciated on a straight-line basis over the 20-year life of the store. Your firm will need to invest $2,000,000 in additional working capital immediately, and recover it at the end of the investment. Your firms marginal tax rate is 30 percent. The cost of capital is 10 percent. What is the NPV for the new store opening?

I got 14483370, but it is wrong. Help please.

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

Contemporary Financial Management

Authors: R. Charles Moyer, James R. McGuigan, William J. Kretlow

11th Edition

0324653506, 978-0324653502

More Books

Students also viewed these Finance questions