Calculate the net after-tax cash flows of the store

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Reference no: EM131610613

Whole Foods is thinking about opening up a new, smaller location in a local mall (call it “Half Foods”). Equipment and fixtures will cost them $400,000 to be depreciated on a straight-line basis over five years to $0 (they will, however, have a salvage value at the end of the store of $100,000). Net working capital will need to be increased immediately by $500,000. First year sales are expected to be $1 million, and will increase at a rate of 8% per year over the ten-year life of the store. Expenses (excluding depreciation) will start at $850,000 the first year and grow at a 7% annual rate each year thereafter. The marginal tax rate is 40%. Calculate the net after-tax cash flows of the store for each year from years 0 to 10 (and assume the working capital investment can be recovered at the end of year 10).

Reference no: EM131610613

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