Mariam Alikozay is considering opening a cold storage refrigeration business. She 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. She estimates that the annual cash inflow from the business will amount to $100,000. Mariam plans to operate the business for only six years. She estimates that the equipment and furnishings could be sold at that time for about 10% of its original cost. The discount rate is 16%. Compute the net present value of this investment.
Mariam Alikozay is considering opening a cold storage refrigeration business. She 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. She estimates that the annual cash inflow from the business will amount to $100,000. Mariam plans to operate the business for only six years. She estimates that the equipment and furnishings could be sold at that time for about 10% of its original cost. The discount rate is 16%. Compute the net present value of this investment.
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter11: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 1P: Talbot Industries is considering launching a new product. The new manufacturing equipment will cost...
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Mariam Alikozay is considering opening a cold storage refrigeration business. She 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
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