A warehouse close to the business district

Assignment Help Corporate Finance
Reference no: EM13304325

You have decided to cash in on the dancing craze in your town, so you are thinking aboutsetting up a dance studio. You can rent a warehouse close to the business district for $40000 p.a. In order to attract the 'right' sort of clientele, you will need to spend $120 000 onredecorating and installing mirrors on all surfaces. You will also purchase some equipmentat a cost of $70 000. You expect that the equipment can be sold at the end of four years for$7 000.
Your market research suggests you can attract and maintain 600 students. Each would payan annual tuition fee of $900. Instructors are usually paid a salary of $43 000 p.a. and youwould employ 5 of these to keep the studio operating 7 days a week. You will operate thebusiness for 4 years before retiring. If your cost of capital is 14%, should you set up thebusiness? Calculate IRR and NPV to support your decision.

Reference no: EM13304325

Questions Cloud

The project npv if the initial outlay is $21 million : A project can generate unlevered cash flow of $3 million per year in perpetuity. Suppose the firm considering this project finances its operations with an equal mix of debt and equit
What is the firm''s wacc if the corporate tax rate is 35% : A firm has 1,000,000 shares of stock outstanding, and each share is currently worth $22. The stock has a beta of 1.2. The firm also has 10-year bonds outstanding with a par value of $10,000,000
The profit will be different from the butterfly spread : If you create a butterfly spread using 3 put options, the profit will be different from the butterfly spread using 3 call options with the same strike prices
What must total asset turnover be : A firm wishes to maintain an internal growth rate of 9.75 percent and a dividend payout ratio of 43 percent. The current profit margin is 6.5 percent and the firm uses no external financing sources.
A warehouse close to the business district : You have decided to cash in on the dancing craze in your town, so you are thinking aboutsetting up a dance studio. You can rent a warehouse close to the business district for $40000 p.a.
How will this impact retained earnings : XYZ Company has a net loss of $100,000 for the year and pays dividends of $30,000 to its shareholders. How will this impact Retained Earnings?
Three decimal places.$ million : What does the NPV become if the tax rate falls to 35%? Round your answer to three decimal places.$ million
Preferred stock or common stock as an investmen twhy : Write a 500 - to 800-word paper explaining why preferred stock is referred to aspreferred and what some of the features added to preferred stock are that make it more attractive to investors. Would you select preferred stock or common stock as..
Managerial accounting : Managerial accounting.. a) focuses primarily on reporting to regulatory agencies

Reviews

Write a Review

Corporate Finance Questions & Answers

  Impact of the global economic crisis on business environment

This paper reviews the article of ‘the impact of the global economic crisis on the business environment' that is written by Roman & Sargu (2011).

  Explain the short and the long-run effects on real output

Explain the short and the long-run effects on real output, price, and unemployment

  Examine the requirements for measuring assets

Examine the needs for measuring assets at fair value in accounting standards

  Financial analysis report driven by rigorous ratio analysis

Financial analysis report driven by rigorous ratio analysis

  Calculate the value of the merged company

Calculate the value of the merged company, the gains (losses) to each group of shareholders, NPV of the deal under different payment methods. Synergy remains the same regardless of payment method.

  Stock market project

Select five companies for the purpose of tracking the stock market, preparing research on the companies, and preparing company reports.

  Write paper on financial analysis and business analysis

Write paper on financial analysis and business analysis

  Intermediate finance

Presence of the taxes increase or decrease the value of the firm

  Average price-earnings ratio

What is the value per share of the company's stock

  Determine the financial consequences

Show by calculation the net present value for the three alternatives (no education, network design certification, mba). Also, according to NPV suggest which alternative you advise your friend to choose

  Prepare a spread sheet model

Prepare a spread sheet model for the client that determines NPV/IRR with and without tax.

  Principles and tools for financial decision-making

Principles and tools for financial decision-making. Analyse the concept of corporate capital structure and compute cost of capital.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd