What is the value of the service in today dollars

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Question: You are the manager of a grocery store and you are considering an opportunity to offer delivery services to your customers. You estimate that the licensing and set-up costs will amount to $150,000 initially and that you will be spending about $70,000 annually to provide the service (Both figures are net of taxes.) As a result of the service, you expect sales at the store, which are $5 million currently, to increase by 20%. Your after-tax operating margin on new sales is 10%. If your cost of capital is 15%, and you expect the store to remain open for 10 years, what is the value of this service in today's dollars?

Reference no: EM131951583

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