Annual cash outflow for operating costs

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Jim Bingham is starting a small catering business. He would require purchasing a delivery van and several equipment costing $125,000 to equip business and another $60,000 for inventories and other working capital requirements. Rent for building used by the business will be $35,000 per year. Jim's marketing studies indicate that annual cash inflow from business will amount to $120,000. In addition to building rent, annual cash outflow for operating costs will amount to $40,000. Jim wants to work the catering business for only six years. He guesses that the equipment could be sold at that time for 4 percent of its original cost. Jim uses a 16 percent discount rate.

Reference no: EM1376465

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