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They are evaluating turning the property into a restaurant to be called "The Station". If they open this up as a restaurant, they will have to invest another $500,000 in restaurant equipment and fixtures, which will be depreciated over 20 years on a straight-line basis. The friend expects for the restaurant to be open for 20 years and then to shut down. At that time (20 years from now), your friend thinks they can sell the equipment for $120,000 and will have to spend $140,000 to restore the location back into a non-restaurant space (which can be deducted for tax purposes in that year). Finally, your friend will need to spend $50,000 in working capital at the time of initial equipment and fixture investment and will be able to recover this when the restaurant closes. Each year the restaurant is open, your friend expects to bring in revenue of $450,000, for food costs to be 1/3 of revenues and for other operating costs to be $125,000 per year. Your friend's tax rate is 25%. Problem 1: What are the appropriate project level cash flows related to this project? Show all of your work. Problem 2: If your friend believes he should earn a 15% after-tax rate of return, is this a good investment? Be specific about your answer in terms of financial calculations and explanation Problem 3: What pre-tax annual rent would your friend need to receive each year for 20 years in order for them to be indifferent to starting the restaurant vs. renting the building to someone else from a strictly financial point of view? You may assume that both of these alternatives have the same risk and that the friend wants to earn the same return whether they build the restaurant vs. rent the building to someone else.
What is the project payback period and project NPV? You are considering a project with an initial cash outlay of $160,000 expected free cash flows of $40,000
Four years from now Antiair will pay dividends that are 75% of its earnings. If its equity cost of capital is 10%, what is the value of a share of Antiair today
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Weber Corporation has 10 million shares of a preferred stock issue outstanding that pays a cumulative $6 annual dividend on a quarterly basis. However, due to poor profitability the company has not paid the preferred stock dividend for the last five ..
Last month a friend borrowed from his 401k to pay off his car loan. Interests on his car loan were at 8 percent with about $250 in monthly payments. The idea he said is that, instead of paying the 8 percent interest to the bank, why not take out from..
Compute the internal rate of return for each of the projects using Excel functions. Based on internal rate of return, indicate whether each project.
tto raise capital companies might sell bonds. this allows them to bypass lenders such as banks and go directly to the
Calculate the investment ratios for Toyota motor corporation for the period 2020 to 2021 using the financial statements downloaded from Toyota
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Review regarding the reinforcement of controls of top management towards review and approve transaction process and development of the procedures
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Notice two mistakes that are not uncovered by the Trial Balance? Why diary is known as the book of unique passage? What is diary appropriate?
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