You have just completed a $24,000 feasibility study for a new coffee shop in some retail space you own. You bought the space two years ago for $101,000, and if you sold it today, you would net $111,000 after taxes. Outfitting the space for a coffee shop would require a capital expenditure of $28,000 plus an initial investment of $4,900 in inventory. What is the correct initial cash flow for your analysis of the coffee shop opportunity? Identify the relevant incremental cash flows below: (Select all the choices that apply.) A. Price you paid for the space two years ago. B. Feasibility study for the new coffee shop. C. Initial investment in inventory. D. Amount you would net after taxes should you sell the space today. E. Capital expenditure to outfit the space. Calculate the initial cash flow below: (Round to the nearest dollar.) 1 (1) $ 2 (2) $ 3 (3) $ 4 Free Cash Flow $ (1) Capital Expenditure (outfit of space) Capital Expenditure (price of space) Change in Net Working Capital Feasibility Study Cost Opportunity Cost (2) Capital Expenditure (outfit of space) Capital Expenditure (price of space) Change in Net Working Capital Feasibility Study Cost Opportunity Cost (3) Capital Expenditure (outfit of space) Capital Expenditure (price of space) Change in Net Working Capital Feasibility Study Cost Opportunity Cost
You have just completed a $24,000 feasibility study for a new coffee shop in some retail space you own. You bought the space two years ago for $101,000, and if you sold it today, you would net $111,000 after taxes. Outfitting the space for a coffee shop would require a capital expenditure of $28,000 plus an initial investment of $4,900 in inventory. What is the correct initial cash flow for your analysis of the coffee shop opportunity? Identify the relevant incremental cash flows below: (Select all the choices that apply.) A. Price you paid for the space two years ago. B. Feasibility study for the new coffee shop. C. Initial investment in inventory. D. Amount you would net after taxes should you sell the space today. E. Capital expenditure to outfit the space. Calculate the initial cash flow below: (Round to the nearest dollar.) 1 (1) $ 2 (2) $ 3 (3) $ 4 Free Cash Flow $ (1) Capital Expenditure (outfit of space) Capital Expenditure (price of space) Change in Net Working Capital Feasibility Study Cost Opportunity Cost (2) Capital Expenditure (outfit of space) Capital Expenditure (price of space) Change in Net Working Capital Feasibility Study Cost Opportunity Cost (3) Capital Expenditure (outfit of space) Capital Expenditure (price of space) Change in Net Working Capital Feasibility Study Cost Opportunity Cost
Chapter10: Project Cash Flows And Risk
Section: Chapter Questions
Problem 13PROB
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Question 13
You have just completed a
$24,000
feasibility study for a new coffee shop in some retail space you own. You bought the space two years ago for
$101,000,
and if you sold it today, you would net
$111,000
after taxes. Outfitting the space for a coffee shop would require a capital expenditure of
$28,000
plus an initial investment of
$4,900
in inventory. What is the correct initial cash flow for your analysis of the coffee shop opportunity?Identify the relevant incremental cash flows below: (Select all the choices that apply.)
Price you paid for the space two years ago.
Feasibility study for the new coffee shop.
Initial investment in inventory.
Amount you would net after taxes should you sell the space today.
Capital expenditure to outfit the space.
Calculate the initial cash flow below: (Round to the nearest dollar.)
|
1
|
(1)
|
$
|
|
|
2
|
(2)
|
$
|
|
|
3
|
(3)
|
$
|
|
|
4
|
|
$
|
|
(1)
Capital Expenditure (outfit of space)
Capital Expenditure (price of space)
Change in Net Working Capital
Feasibility Study Cost
Opportunity Cost
(2)
Capital Expenditure (outfit of space)
Capital Expenditure (price of space)
Change in Net Working Capital
Feasibility Study Cost
Opportunity Cost
(3)
Capital Expenditure (outfit of space)
Capital Expenditure (price of space)
Change in Net Working Capital
Feasibility Study Cost
Opportunity Cost
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