A store will cost $875,000 to open. Variable costs will be 51% of sales and fixed...

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A store will cost $875,000 to open. Variable costs will be 51% of sales and fixed...

A store will cost $875,000 to open. Variable costs will be 51% of sales and fixed costs are $210,000 per year. The investment costs will be depreciated straight-line over the 9 year life of the store to a salvage value of zero. The opportunity cost of capital is 8% and the tax rate is 40%.

Find the operating cash flow each year if sales revenue is $700,000 per year.

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Answer 1

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700,000 Sales Less: Costs Depreciation EBIT Less: Tax @ 40% Net income Add: Depreciation 567,000 =700000*51%+210000 97,222 =8

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A store will cost $875,000 to open. Variable costs will be 51% of sales and fixed...

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