Question 17 Not yet answered Marked out of 10.00 P Flag question Your family is running a zero waste shop in one of the

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Question 17 Not Yet Answered Marked Out Of 10 00 P Flag Question Your Family Is Running A Zero Waste Shop In One Of The 1 (84.96 KiB) Viewed 60 times

Question 17 Not yet answered Marked out of 10.00 P Flag question Your family is running a zero waste shop in one of the large cities of the country. The demand and the historical sales data are promising, therefore they consider extending your activities and adding some new products of ethical companies to your product portfolio. They will have to enlarge your store, which means TEUR 300 cash-out-flow related to fixed assets today which you can linearly depreciate in 10 years. You estimate a yearly increase in their sales of 210 TEUR for the first year. In the coming years, the additional sales resulting from the investment will grow by 25 TEUR. (At the end of the fourth year, there will not take place any investment in inventory.) Usually, their current costs are 60% of your sales. To start the project, also a kick-off inventory of TEUR 21 is needed. In the coming years, the level of inventory will be 10% of the estimated sales which has to be available at the beginning of the year. The family firm pays by cash to the suppliers and so do the customers. The corporate tax rate is 20%. Based on your calculations, at the end of the fourth year, the value of your business will be high enough to decide on an exit strategy. Selling the company will generate an after-tax corporate cash flow of 300 TEUR. This successful exit will allow your family to start their favourite business idea, an eco-guesthouse in the nearby mountains. years 0 1 2 3 EBIT CAPEX 0 0 0 0 FCFF