View the step-by-step solution to:

You are the CFO of SlimBody, Inc., a retailer of the exercise machine Slimbody6* and related accessories. Your firm is considering opening up a new...

You are the CFO of SlimBody, Inc., a retailer of the exercise machine Slimbody6* and related accessories. Your firm is considering opening up a new store in Los Angeles. The store will have a life of 20 years. It will generate annual sales of 5,000 exercise machines, and the price of each machine is $2,500. The annual sales of accessories will be $600,000, and the operating expenses of running the store, including labor and rent, will amount to 50 percent of the revenues from the exercise machines. The initial investment in the store will equal $30 million and will be fully depreciated on a straight-line basis over the 20-year life of the store. Your firm will need to invest $2 million in additional working capital immediately, and recover it at the end of the investment. Your firm’s marginal tax rate is 30 percent. The opportunity cost of opening up the store in 10 percent. At the end of the store’s life, the company expects to sell various fixtures and equipment for $2,000,000.

Question: Determine the payback period for the project.

Sign up to view the entire interaction

Top Answer

Solution Rate me 5 stars if... View the full answer

Answer 5.xlsx

Particulars
Initial investment
Additional working capital
Annual sales of machines
Annual sales of accessories
Less - cost of production
Less - depreciation
Profit before tax
Less - tax
Profit...

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Ask a homework question - tutors are online