You are the owner of a small bar, The World, and you are considering opening a bakery in a vacant area in the back of the store. You estimate that it will cost you $52,175.00 to set up the bakery and that you will generate $10,758.00 in after-tax cash flows in for the life of the store (which is expected to be 10 years.) The one concern you have is that you have limited parking; by opening the bakery you run the risk of not having enough parking for customers who enjoy your bar. You estimate that the lost sales would amount to $3,230.00 per year and that your after-tax operating margin on sales at the bar is 54.00%. If your discount rate is 14.00%, what is the NPV of opening the bakery

You are the owner of a small bar, The World, and you are considering opening a bakery in a vacant area in the back of the store. You estimate that it will cost you $52,175.00 to set up the bakery and that you will generate $10,758.00 in after-tax cash flows in for the life of the store (which is expected to be 10 years.) The one concern you have is that you have limited parking; by opening the bakery you run the risk of not having enough parking for customers who enjoy your bar. You estimate that the lost sales would amount to $3,230.00 per year and that your after-tax operating margin on sales at the bar is 54.00%. If your discount rate is 14.00%, what is the NPV of opening the bakery

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter26: Capital Budgeting (capbud)

Section: Chapter Questions

Problem 1R

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