Question
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 Los Angeles. The store will have a life of 20 years. It will generate annual sales of 5,200 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 $28,000,000 and will be fully depreciated on a straight-line basis over the 20-year life of the store. Your firm will need to invest $2,500,000 in additional working capital immediately, and recover it at the end of the investment. Your firms marginal tax rate is 30 percent. The opportunity cost of opening up the store is 12.20 percent. What are the incremental free cash flows from this project at the beginning of the project as well as in years 119 and 20? Should you approve it? (Round answers to the nearest dollar, e.g. 5,275. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Incremental cash flow at the beginning of the project $ Incremental cash flow in the years 1-19 $ Incremental cash flow in the year 20 $ NPV of the project $ You the project.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started