Determine net present value level of annual sales volume

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Reference no: EM133674211

Questions

1. Daisey's Doughnuts and Gourmet Coffee is considering a new store location. The projected fixed annual cash operating costs for a store are $435,000 a year, variable costs are 52 percent of sales, and taxes are 29% of pretax income. The annual net income break-even level of sales (in dollars) for this store location is _______.

2. Bronze It Tanning Salon expects annual sales of $1,325,000, annual fixed cash outlays are $720,000 a year at each location, variable cash outlays are 15 percent of sales, depreciation is $125,000 per year, and taxes are 29% (of pretax income). Initial outlay for the building is $2,340,000. The company does its analysis based on a 20-year store life. We believe the business can be sold for $850,000 after taxes at the end of its 20-year operating life. Using the 11% required return, what is the net present value of this venture?

3. Rework the prior problem to determine the net present value level of annual sales volume that is needed to generate a net present value of $0.

Reference no: EM133674211

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