Bob’s Submarine Sandwiches expects annual sales of $180,000, annual fixed cash outlays are $51,750 a year...

Bob’s Submarine Sandwiches expects annual sales of $180,000, annual fixed cash outlays are $51,750 a year at each location, variable cash outlays are 36 percent of sales, depreciation is $14,000 per year, and taxes are 28% (of pretax income). Opening promotion and other costs require an initial outlay of $86,000. The company does its analysis based on a 8-year store life. Bob believes the business can be sold for $110,000 after taxes (disposal value) at the end of its 8 year lifer. Using a 9% required return, what is the net present value of this venture?

Expert Solution

Solution :

The net present value of this venture = $ 243,754.46

= $ 243,754 ( When rounded off to the nearest whole number )

Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.

jeff jeffy answered 3 months ago

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