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A quaint but well-established coffee shop, the Hot New Cafe, wants to build a new cafe...

A quaint but well-established coffee shop, the Hot New Cafe, wants to build a new cafe for increased capacity. Expected sales are $800,000 for the first 5 years. Direct costs including labor and materials will be 50% of sales. Indirect costs are estimated at $200,000 a year. The cost of the building for the new cafe will be a total of $850,000, which will be depreciated straight line over the next 5 years. The firm's marginal tax rate is 38%, and its cost of capital is 10%.. Prepare a capital budget for Hot New Café with net cash flows over a 5-year period. Show me how to do this? Im having the most trouble with determining NPV, PV and Payback Period. I also want to check my other calculations against yours.

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Hi There, Please find the solution of the above mentioned problem. Thanks

jeff jeffy answered 1 year ago
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