ZuoTi.Pro
Question

A convenience store owner is contemplating putting a large neon sign over his store. It would cost $50,000, but is expected t

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Here our criteria is to accept projects which have payback of less than 2 years

Payback =initial investment/annual cash flow

= 50000/24000 = 2.08

So it doesn't match our criteria as it has payback more than 2 years so we should reject the project

So correct answer is option D

0 0
Add a comment
Know the answer?
Add Answer to:
A convenience store owner is contemplating putting a large neon sign over his store. It would...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • 1.You and a partner are considering the purchase of a convenience store. The store has annual...

    1.You and a partner are considering the purchase of a convenience store. The store has annual sales of $500,000 and is paying annual payroll of $100,000. The cost of goods sold every year is $150,000. The firm has miscellaneous expenses (taxes, insurance, garbage, electricity, natural gas, security, maintenance, property taxes, training, advertising, accounting fees, bank charges, etc.) of roughly $68,000 per year. If depreciation is equal to $16,054 per year what is the Earnings before taxes? 2.Suppose you conduct a...

  • Darren Mack owns the "Gas n' Go" convenience store and gas station. After hearing a marketing...

    Darren Mack owns the "Gas n' Go" convenience store and gas station. After hearing a marketing lecture, he realizes that it might be possible to draw more customers to his high-margin convenience store by selling his gasoline at a lower price. However, the "Gas n' Go' is unable to qualify for volume discounts on its gasoline purchases, and therefore cannot sell gasoline for profit if the price is lowered. Each new pump will cost $85,000 to install, but will increase...

  • Darren Mack owns the​ "Gas n'​ Go" convenience store and gas station. After hearing a marketing​...

    Darren Mack owns the​ "Gas n'​ Go" convenience store and gas station. After hearing a marketing​ lecture, he realizes that it might be possible to draw more customers to his​ high-margin convenience store by selling his gasoline at a lower price.​ However, the​ "Gas n'​ Go' is unable to qualify for volume discounts on its gasoline​ purchases, and therefore cannot sell gasoline for profit if the price is lowered. Each new pump will cost ​$130,000 to​ install, but will increase...

  • You are the owner of a small hardware store, and you are considering opening a gardening...

    You are the owner of a small hardware store, and you are considering opening a gardening store in a vacant area in the back of your present store. You estimate that it will cost you $50,000 to set up the new store, and that you will generate $10,000 in after-tax cash flows from the store for the life of the store (which is expected to be ten years). The one concern you have is that you have limited parking; by...

  • Bliss Beauty Products is considering an investment in one of two new product lines. The investment...

    Bliss Beauty Products is considering an investment in one of two new product lines. The investment required for either product line is $2,800,000. The net cash flows associated with each product are shown below. Year Shampoo/Conditioner Body Wash 1 $700,000 $400,000 2 650,000 400,000 3 550,000 400,000 4 450,000 400,000 5 450,000 400,000 6 200,000 400,000 7 100,000 400,000 8 100,000 400,000 Total $3,200,000 $3,200,000 a. Recommend a product offering to Bliss Beauty Products, based on the cash payback period...

  • You are considering opening a new plant. The plant will cost $99.5 million upfront and will...

    You are considering opening a new plant. The plant will cost $99.5 million upfront and will take one year to build. After that, it is expected to produce profits of $29.2 million at the end of every year of production. The cash flows are expected to last forever. Calculate the NPV of this investment opportunity if your cost of capital is 8.1%. Should you make the investment? Calculate the IRR. Does the IRR rule agree with the NPV rule? Years...

  • You are considering opening a new plant. The plant will cost $95.5 million upfront and will...

    You are considering opening a new plant. The plant will cost $95.5 million upfront and will take one year to build. After​ that, it is expected to produce profits of $29.1 million at the end of every year of production. The cash flows are expected to last forever. Calculate the NPV of this investment opportunity if your cost of capital is 6.5%. Should you make the​ investment? Calculate the IRR. Does the IRR rule agree with the NPV​ rule? Here...

  • Payback period essentially provides the number of years it would take for a project to recover...

    Payback period essentially provides the number of years it would take for a project to recover the initial investment from its operating cash flows. As the model was criticized, the model evolved incorporating time value of money to create the discounted payback method. The models still reflected faulty ranking criteria but they provided important information about liquidity and risk. The _______ the payback, other things constant, the greater the project’s liquidity. Suppose ABC Telecom Inc.’s CFO is evaluating a project...

  • Payback period essentially provides the number of years it would take for a project to recover...

    Payback period essentially provides the number of years it would take for a project to recover the initial investment from its operating cash flows. As the model was criticized, the model evolved incorporating time value of money to create the discounted payback method. The models still reflected faulty ranking criteria but they provided important information about liquidity and risk. The the payback, other things constant, the greater the project's liquidity. Suppose Omni Consumer Products's CFO is evaluating a project with...

  • You are considering opening a new plant. The plant will cost S98.1 million upfront and will...

    You are considering opening a new plant. The plant will cost S98.1 million upfront and will take one year to build. After that, it is expected to produce profits of $30.9 million at the end of every year of production. The cash flows are expected to last forever. Calculate the NPV of this investment opportunity if your cost of capital is 7.3%. Should you make the investment? Calculate the IRR. Does the IRR rule agree with the NPV rule? Here...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT