Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You have decided to start a new magazine. Minum will be targeted at sensitive guys and will have regular articles on abstinence , temperance and

You have decided to start a new magazine. Minum will be targeted at sensitive guys and will have regular articles on abstinence, temperance and cultural events such as opera and the symphony. You estimate your magazine will cost $510,074.04 in start-up costs. Annual expenses are expected to be $125,000 and subscription and advertising revenue is expected to total $200,000 for each of the first two years and $300,000 in each of the following three years after which time you will sell your magazine for $400,000. Your MARR is 15%(remember, all cash outflows including annual expenses occur at the beginning of the year and inflows at the end of the year) a) Should you invest? What is the NPV? b) You are worried that interest rates may rise what is the maximum rate that would still make this an acceptable project? c) Your accountant has told you your selling price is too optimistic, what is the minimum selling price that would make this a worthwhile investment? d) How much could your start up costs increase by and still make this a worthwhile investment? e) Right after paying the start-up costs and first year's expenses you decided to sell - how much money should you ask for? f) You have decided that the consumption of beer is not an appropriate activity for men and will not accept beer ads - what is the maximum annual decrease in revenue that would still make this a worthwhile investment?

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

Accounting Principles

Authors: Jerry Weygandt, Paul Kimmel, Donald Kieso

12th edition

1119132223, 978-1-119-0944, 1118875052, 978-1119132226, 978-1118875056

Students also viewed these Finance questions