Question

HighJump Inc. is considering partnering with FieldFeet to open "Athlete Heaven" stores in the United States...

HighJump Inc. is considering partnering with FieldFeet to open "Athlete Heaven" stores in the United States as it seeks to expand its own retail network to better control how its products are displayed and sold. One particular store will require an initial investment of $220,000 and an annual operating cost of $59,000. The buildings and equipment will have a $62,500 resale value after 10 years. HighJump expects the store to generate annual revenue of $69,000. Calculate the future worth of the investment in this particular store at the end of year 10, and determine the acceptability of the investment if the company's minimum attractive rate of return is 8% per year.

0 0
Add a comment Improve this question Transcribed image text
Answer #1

i = 8%

Present worth of the store = -220000 + (69000 - 59000)*(P/A,8%,10) + 62500*(P/F,8%,10)

= -220000 + 10000*(P/A,8%,10) + 62500*(P/F,8%,10)

= -220000 + 10000*6.710081 + 62500*0.463193

= -123949.59

Future worth after 10 years = -123949.59 * (F/P, 8%,10)

= -123949.59 * 2.158924

= -267597.87

As future worth is negative, therefore project is not acceptable

Add a comment
Know the answer?
Add Answer to:
HighJump Inc. is considering partnering with FieldFeet to open "Athlete Heaven" stores in the United States...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

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
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