Incremental pretax cash flows attributable to expansion

Assignment Help Operation Management

Reference no: EM132214223

Roche Brothers is considering a capacity expansion of its supermarket. The landowner will build the addition to suit in return for ?$200,000 upon completion and a? five-year lease. The increase in rent for the addition is ?$10,000 per month. The annual sales projected through year 5 follow. The current effective capacity is equivalent to? 500,000 customers per year. Assume a 2 percent pretax profit on sales.

year 1 2 3 4 5

Customers 560K 600K 685K 700K 715K

Avg. Sales $50 $53 $56 $60 $64

per customer

a. If Roche expands its capacity to serve? 700,000 customers per year now? (end of year? 0), what are the projected annual incremental pretax cash flows attributable to this? expansion?

Also, if Roche expands its capacity to serve 700,000 customers per year at the end of year 2, the landowner will build the same addition for $240K and a 3 year lease at $12K per month. What are the projected annual incremental pretax cash flows attributable to this expansion alternative?

Reference no: EM132214223

Questions Cloud

Improve employee selection results and reduce turnover : There are a number of methods use to improve employee selection results and reduce turnover.

What was the currency variation-exchange rate : What was the Currency variation, Exchange rate, Average per capita income, and Major domestic companies of Mexico in 2017.

What is optimal production quantity for the card : Wholemark is an Internet order business that sells one popular New Year greeting card once a year. What is the optimal production quantity for the card?

Penetration pricing strategy and skimming pricing strategy : What is the difference between a penetration pricing strategy and a skimming pricing strategy?

Incremental pretax cash flows attributable to expansion : What are the projected annual incremental pretax cash flows attributable to this? expansion?

Explain the negative implications of neuroticism : Compare and contrast extraversion and neuroticism. Explain the negative implications of neuroticism.

Does diversity provide competitive advantage to companies : Does diversity provide a competitive advantage to companies? What happens if there were no longer a “business case” for diversity?

Concept of employee engagement with employee satisfaction : Compare concept of employee engagement with employee satisfaction. Provide best practice example of program, actions or methods to boost employee engagement.

Examine at least three significant challenges and risks : Examine at least three significant challenges and risks that an entrepreneur faces when trying to work a full-time job while starting or running a part-time

User Account

All Pages