Compute the NPV (Net Present Value) for each alternative. Assume an 8% discount rate. its supermarket. The landowner will build the addi-tion to suit in return for $200,000 upon completion and$10,000 per month. The annual sales projected through14. Roche Brothers is considering a capacity expansion ofEa009.5-vear lease. The increase in rent for the addition isgathyear6 follow. The current effective capacity is equiva-iont to 500,000 customers per year. Assume a 2 percentC.00pretax profit on sales.Year134560,000 600,000 685,000 700,000 715,000Customers$50.00$53.00$56.00$60.00$64.00Average Salesper Customeryeara. If Roche expands its capacity to serve 700,000customers per year now (end of year 0), what arethe projected annual incremental pretax cash flowsattributable to this expansion?roughg thatdedb. If Roche expands its capacity to serve 700,000customers per year at the end of year 2, the land-owner will build the same addition for $240,000and a 3-year lease at $12,000 per month. What arethe projected annual incremental pretax cash flowsattributable to this expansion alternative?d-00

Net present value is calculated by discounting all future cash inflows and outflows at current time.…

14. Roche Brothers is considering a capacity expansion of tion to suit in return for $200,000 upon completion and its supermarket. The landowner will build the addi- 9.5-vear lease. The increase in rent for the addition is $10.000 per month. The annual sales projected through S 5 follow. The current effective capacity is equiva- ont to 500,000 customers per year. Assume a 2 percent pretax profit on sales, Year 1 4 Customers 560,000 600,000 685,000 700,000 715,000 Average Sales per Customer $50.00 $53.00 $56.00 $60.00 $64.00 a. If Roche expands its capacity to serve 700,000 customers per year now (end of year 0), what are the projected annual incremental pretax cash flows attributable to this expansion? b. If Roche expands its capacity to serve 700,000 customers per year at the end of year 2, the land- owner will build the same addition for $240,000 and a 3-year lease at $12,000 per month. What are the projected annual incremental pretax cash flows attributable to this expansion alternative?

14. Roche Brothers is considering a capacity expansion of tion to suit in return for $200,000 upon completion and its supermarket. The landowner will build the addi- 9.5-vear lease. The increase in rent for the addition is $10.000 per month. The annual sales projected through S 5 follow. The current effective capacity is equiva- ont to 500,000 customers per year. Assume a 2 percent pretax profit on sales, Year 1 4 Customers 560,000 600,000 685,000 700,000 715,000 Average Sales per Customer $50.00 $53.00 $56.00 $60.00 $64.00 a. If Roche expands its capacity to serve 700,000 customers per year now (end of year 0), what are the projected annual incremental pretax cash flows attributable to this expansion? b. If Roche expands its capacity to serve 700,000 customers per year at the end of year 2, the land- owner will build the same addition for $240,000 and a 3-year lease at $12,000 per month. What are the projected annual incremental pretax cash flows attributable to this expansion alternative?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 12P

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