You are the CFO of Ivanhoe, Inc., a retailer of the exercise machine Ivanhoe6 and related accessories. Your firm is considering oper a new store in Los Angeles. The store will have a life of 20 years. It will generate annual sales of 5,500 exercise machines, and the p of each machine is $2,750. The annual sales of accessories will be $756,000, and the operating expenses of running the store, inclu labor and rent, will amount to 50 percent of the revenues from the exercise machines. The initial investment in the store will equal $34,900,000 and will be fully depreciated on a straight-line basis over the 20-year life of the store. Your firm will need to invest $2,000,000 in additional working capital immediately and recover it at the end of the investment. Your firm's marginal tax rate is 3 percent. The opportunity cost of opening up the store is 12.20 percent. What are the incremental free cash flows from this project at the beginning of the project as well as in years 1-19 and 20? (Do not round intermediate calculations. Round NPV answer to 2 decimal places, eg. 5,275.25 and all other answers to O decimal places, eg. 5,275 Incremental cash flow at the beginning of the project $ Incremental cash flow in the years 1-19

You are the CFO of Ivanhoe, Inc., a retailer of the exercise machine Ivanhoe6 and related accessories. Your firm is considering oper a new store in Los Angeles. The store will have a life of 20 years. It will generate annual sales of 5,500 exercise machines, and the p of each machine is $2,750. The annual sales of accessories will be $756,000, and the operating expenses of running the store, inclu labor and rent, will amount to 50 percent of the revenues from the exercise machines. The initial investment in the store will equal $34,900,000 and will be fully depreciated on a straight-line basis over the 20-year life of the store. Your firm will need to invest $2,000,000 in additional working capital immediately and recover it at the end of the investment. Your firm's marginal tax rate is 3 percent. The opportunity cost of opening up the store is 12.20 percent. What are the incremental free cash flows from this project at the beginning of the project as well as in years 1-19 and 20? (Do not round intermediate calculations. Round NPV answer to 2 decimal places, eg. 5,275.25 and all other answers to O decimal places, eg. 5,275 Incremental cash flow at the beginning of the project $ Incremental cash flow in the years 1-19

Name: Current Attempt in ProgressYou are the CFO of Ivanhoe, Inc., a retail
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Description: Current Attempt in ProgressYou are the CFO of Ivanhoe, Inc., a retailer of the exercise machine Ivanhoe6 and related accessories. Your firm is considering openinga new store in Los Angeles. The store will have a life of 20 years. It will generate an

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 8P

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