A proprietor (CHRISTIA) who just inherited a building is considering using it in a new business venture. Projections for the business are: revenue of $100,000, fixed cost of $30,000, and variable cost of $50,000. If the business is not started, the owner will work for a company for a wage of $23,000. Also, there have been two offers to rent the building, one for $1,000 per month and one for $1,200 per month. What is the relevant cost of the building (per annum) to be consider in determining whether to start the business
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A proprietor (CHRISTIA) who just inherited a building is considering using it in a new business venture. Projections for the business are: revenue of $100,000, fixed cost of $30,000, and variable cost of $50,000. If the business is not started, the owner will work for a company for a wage of $23,000. Also, there have been two offers to rent the building, one for $1,000 per month and one for $1,200 per month. What is the relevant cost of the building (per annum) to be consider in determining whether to start the business?
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- A proprietor who just inherited a building is considering using it in a new business venture.Projections for the business are: revenue of $100,000, fixed cost of $30,000, and variable costof $50,000. If the business is not started, the owner will work for a company for a wage of$23,000. Also, there have been two offers to rent the building, one for $1,000 per month andone for $1,200 per month. What are the expected annual net economic profits (losses) to theowner if the new business is started? A. $20,000 B. $(3,000) C. $(15,000) D. $(17,400)Sarah earns an annual salary of £76,000, working for an investment bank. She is considering resigning and setting up her own business. Sarah estimates that the new business requires an initial investment of £96,000 for fixed assets with an expected useful life of five years. Forecast revenues and expenses for the first year of operations are. Sales Operating Expenses Rent Lease of equipment Staff salaries Supplies Utility bills Insurance Business rates Advertising Legal, audit and banking fees £320,000 £52,000 £13,250 £126,500 £22,000 £8,500 £2,500 £4,200 £7,000 £2,500 Sarah has personal savings sufficient to finance 70% of the initial investment. She is currently earning an annual interest rate of 1.2% on the savings. The rest of the investment finance would be provided by a five-year bank loan at a fixed annual rate of 5.9%. Required: a) Calculate the accounting profit for the first year of operations. Assume that the fixed assets are fully depreciated on a…The firm paid $2,200,000 for the warehouse at that time. The owner, " Jack," (as the locals call him), decides if he wants to expand, he will need more space. He decides to expand the size of the current warehouse. This expansion will cost him about $300,000 to construct a new side to the building. Using the additional space wisely, Jack estimates that he will be able to generate about $70,000 more in sales per year, while incurring $41,500 in labor and variable costs of good What is the amount of the Net Capital Expenditure (NCS) on the project
- Now that Tracy has completed her first year in her business, she would like to expand to another location. She has looked at a property near Ft. Lee. She feels this is a prime location since she could provide cupcakes for events and office celebrations at Ft. Lee. She can purchase the property for $48,000 and believes she can build a building with all of the equipment for an additional $148,000. The estimated sales at the new location is $223,000 with a net operating income of $53,000. The minimum acceptable return for these types of investments is 23%. Tracy remembers studying return on investment and residual income from her college classes but needs you to do the calculations and explain what the numbers mean. A.explaining residual income and return on investment on this new venture. B.Calculate both, explain your calculations, and if this will be a good investment for her. Your paper is to be at least one page.Theresa is considering starting a small business. She plans to purchase equipment costing $145,000. Rent on the building used by the business will be $26,000 per year while other operating costs will total $30,000 per year. A market research specialist estimates that Theresa's annual sales from the business will amount to $80,000. Theresa plans to operate the business for 6 years. Disregarding the effects of taxes, what will be the amount of annual net cash flow generated by the business? A) $24,000 B) $56,000 C) $80,000 D) None of these answers is correct.The owner of a small printing company is considering the purchase of additional printing equipment to expand her business. If the owner expands the business and sales are high, projected profits (minus the cost of the equipment) should be $90,000; if sales are low, projected profits should be $40,000. If the equipment is not purchased, projected profits should be $70,000 if sales are high and $50,000 if sales are low. Are there options other than the purchase of additional equipment that should be considered in making the decision to expand the business? If the owner is optimistic about the company's future sales, should the company expand by purchasing the equipment? Is the owner's optimism or pessimism about sales the only factor that may impact the company's profits? The equipment to be purchased is known in the industry to have a useful life of five years. How might this impact the printing company?
- You are an employee of University Consultants, Ltd., and have been given the following assignment. You are to present an investment analysis of a new small residential income-producing property for sale to a potential investor. The asking price for the property is $1,250,000; rents are estimated at $200,000 during the first year and are expected to grow at 3percent per year thereafter. Vacancies and collection losses are expected to be 10 percent of rents. Operating expenses will be 35 percent of effective gross income. A 70 percent loan can be obtained at 11 percent interest for 30 years. The property is expected to appreciate in value at 3 percent per year and is expected to be owned for five years and then sold. a. What is the investor’s expected before-tax internal rate of return on equity invested (BTIRR)?b. What is the first-year debt coverage ratio?c. What is the terminal capitalization rate?d. What is the NPV using a 14 percent discount rate? What does this mean?Suppose, you start your own business which is a pet store. The total cost of purchasing supplies and hiring labor is $50,000 per year. To run the pet store, you quit your job that pays $45,000 per year and use the building that you already own (a building like yours rents out for $60,000 per year). Also, your car payment is $24,000 per year (you may use your car for the business sometimes). What is the total opportunity cost of opening up a pet store for a year?You are an employee of University Consultants, Limited, and have been given the following assignment. You are to present an investment analysis of a small retail income-producing property for sale to a potential investor. The asking price for the property is $1,350,000; rents are estimated at $172,800 during the first year and are expected to grow at 2.5 percent per year thereafter. Vacancies and collection losses are expected to be 10 percent of rents. Operating expenses will be 35 percent of effective gross income. A fully amortizing 70 percent loan can be obtained at 7 percent interest for 30 years (total annual payments will be monthly payments × 12). The property is expected to appreciate in value at 3 percent per year and is expected to be owned for five years and then sold. Required: a. What is the first-year debt coverage ratio? b. What is the terminal capitalization rate? c. What is the investor’s expected before-tax internal rate of return on equity invested (BTIRR)? d.…
- Mark Stevens is considering opening a hobby and craft store. He would invest $50,000 to purchase equipment and furnishings and another $100,000 for inventories and other working capital needs. Rent on the building used by the business will be $25,000 per year. In addition to building rent, other annual cash outflows for operating costs will amount to $44,000. Mark estimates that the annual cash inflow from the business will amount to $100,000. Mark plans to operate the business for only six years. He estimates that the equipment and furnishings could be sold at that time for about 10% of its original cost. Mark's discount rate is 16%. All cash flows, except for the initial investment, would occur at the ends of the years. Required: Compute the net present value of this investment.Lou Lewis, the president of Lewisville Company has asked you to give him an analysis of the best use of a warehouse the company owns. The company has a 40% effective tax rate. a. Lewisville Company is currently leasing the warehouse to another company for $5,000 per month on a year-to-year basis. b. The warehouse's estimated sales value is $200,000. A commercial realtor believes that the price is likely to remain unchanged in the near future. The building originally cost $60,000 and is being depreciated at $1,500 annually. Its current net book value (NBV) is $7,500. 1. Show how you would handle the individual items in determining whether the company should continue to lease the space or convert it to a factory outlet. Use PV function in Excel, VDB function in Excel to calculate annual depreciation charges. Use NPV function to calculate depreciation tax savings. (complete questions is attached.) Thank you!!!You are an employee of University Consultants, Limited, and have been given the following assignment. You are to present an investment analysis of a small retail income-producing property for sale to a potential investor. The asking price for the property is $1,290,000; rents are estimated at $165,120 during the first year and are expected to grow at 2.5 percent per year thereafter. Vacancies and collection losses are expected to be 10 percent of rents. Operating expenses will be 35 percent of effective gross income. A fully amortizing 70 percent loan can be obtained at 7 percent interest for 30 years (total annual payments will be monthly payments × 12). The property is expected to appreciate in value at 3 percent per year and is expected to be owned for five years and then sold. Required: a. What is the first-year debt coverage ratio? Answer: 1.33 b. What is the terminal capitalization rate? c. What is the investor’s expected before-tax internal rate of return on equity invested…
