Annual sales volume is needed to generate net present value

Assignment Help Financial Management

Reference no: EM131566106

Teresa’s Tanning Salon expects annual sales of $175,000, annual fixed cash outlays are $57,000 a year at each location, variable cash outlays are 25 percent of sales, depreciation is $15,000 per year, and taxes are 32% (of pretax income). Initial outlay for the building is $440,000. The company does its analysis based on a 10-year store life. We believe the business can be sold for $500,000 after taxes (disposal value) at the end of its 10 year life.

a) Using an 8% required return, what is the net present value of this venture?

b) What annual sales volume is needed to generate a net present value of $0?

Reference no: EM131566106

Questions Cloud

Arithmetic average return on crash-n-burn stock : What was arithmetic average return on Crash-n-Burn’s stock over this five year period? What was standard deviation of Crash-n-Burn’s returns over this period?

What is madison weighted average cost of capital : What is Madison’s weighted average cost of capital? Madison should stay where it is or adopt the higher debt oriented capital structure?

Payments does lease have a positive npv for both parties : For what range of lease payments does the lease have a positive NPV for both parties?

Loan agreement with bank and begin taking the discount : Should Simple Simon's enter the loan agreement with the bank and begin taking the discount

Annual sales volume is needed to generate net present value : What annual sales volume is needed to generate a net present value of $0?

Index funds usually pay higher taxes and managed funds : Index funds usually pay higher taxes and managed funds usually have lower fees. An index fund is actively managed and a managed fund usually has higher fees.

Several terms are unique to auto leases : Automobiles are often leased, and several terms are unique to auto leases. What is your monthly lease payment for 36-month lease if the sales tax is 7 percent?

What lease payment will make lessee and the lessor equally : What lease payment will make the lessee and the lessor equally well off?

Lease or buy new computer-assisted drilling system : The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted drilling system for its oil exploration business.

User Account

All Pages