Question

Six Twelve, Inc., is considering opening up a new convenience store in downtown New York City. The expected annual revenue at the new store is $700,000. To estimate the increase in working capital, analysts estimate the ratio of cash and cash-equivalents to revenue to be 0.03 and the ratios of receivables, inventories, and payables to revenue to be 0.05, 0.10, and 0.04, respectively, in the same industry. What is the expected incremental cash flow related to working capital when the store is opened? (Enter negative amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Incremental cash flow

$

2:

Problem 10.15

You are buying a sofa. You will pay $200 today and make three consecutive annual payments of $300 in the future. The real rate of return is 15.5 percent, and the expected inflation rate is 4 percent. What is the actual price of the sofa? (Round intermediate calculation and final answer to 2 decimal places, e.g. 15.25.)

Actual price

$

Answer 1

(1) Solutions Given data , at the new expected annual revenue 1 store is $700000 Cash equivalants to revenue 003. . .. Receivables oros Inventaries : 0.01 pajable Resenue bou working Capital= cash + Receivables+ Doventaries i poyable Revenue = 700 000 X 0.3+ 100 000 XO US + 700000X001 - 70000D X 0.04 = 21000: +35000 + 7000D- 28000 = 98000

Given data, Read rate of return . 15.5% expected inflation sate 4% 8= (It real rate of reture) (at inflation rate)-1 = (1 +0.155) (1 + 0.04) - 1 31:155301.04)-1 1. 2012-1 -0.2012 - 20.12% 200 + 300 x 300 + 300 10-2012 (70.2012)? (1+0-2012) price = = 200 + 300 3001 300 1:20121-4428 17331 200+ 249.7502 + 207.9290 + 173-1002 : $830,7794