Question

A cookie company wants to expand its retail operations. Based on a preliminary study, 10 stores are feasible in various parts of the country. The cash flow at each store is expected to be $190 per year for five consecutive years. Each store requires an immediate investment of $550 to set up operations. Assuming a required rate of return 8%, what is the NPV of each store?

Answer 1

Year	Cash Flow	PV Factor	PV Of Cash Flow
a	b	c=1/1.08^a	d=b*c
0	$      -550	1.00000	$               -550.00
1	$        190	0.92593	$                 175.93
2	$        190	0.85734	$                 162.89
3	$        190	0.79383	$                 150.83
4	$        190	0.73503	$                 139.66
5	$        190	0.68058	$                 129.31
	NPV		$                 208.61