Question 14 You have just completed a$20,000feasibility study for a new coffee shop in some retail space you own. You bought the space two years ago for$100,000,and if you sold it today, you would net$115,000after taxes. Outfitting the space for a coffee shop would require a capital expenditure of$30,000plus an initial investment of$5,000in inventory. What is the correct initial cash flow for your analysis of the coffee shop opportunity?Identify the relevant incremental cash flows below: (Select all the choices that apply.) A.Capital expenditure to outfit the space. B.Initial investment in inventory. C.Amount you would net after taxes should you sell the space today. D.Price you paid for the space two years ago. E.Feasibility study for the new coffee shop.Calculate the initial cash flow below:Round to the nearest dollar.) 1(1) $ 2(2) $ 3(3) $ 4Free Cash Flow$ (1) Capital Expenditure (outfit of space) Capital Expenditure (price of space) Change in Net Working Capital Feasibility Study Cost Opportunity Cost(2) Capital Expenditure (outfit of space) Capital Expenditure (price of space) Change in Net Working Capital Feasibility Study Cost Opportunity Cost(3) Capital Expenditure (outfit of space) Capital Expenditure (price of space) Change in Net Working Capital Feasibility Study Cost Opportunity Cost

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Answered: You have just completed a $20,000…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 9E: Each of the following scenarios is independent. All cash flows are after-tax cash flows. Required:...

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Question 14

You have just completed a

$20,000

feasibility study for a new coffee shop in some retail space you own. You bought the space two years ago for

$100,000,

and if you sold it today, you would net

$115,000

after taxes. Outfitting the space for a coffee shop would require a capital expenditure of

$30,000

plus an initial investment of

$5,000

in inventory. What is the correct initial cash flow for your analysis of the coffee shop opportunity?

Identify the relevant incremental cash flows below: (Select all the choices that apply.)

Capital expenditure to outfit the space.

Initial investment in inventory.

Amount you would net after taxes should you sell the space today.

Price you paid for the space two years ago.

Feasibility study for the new coffee shop.

Calculate the initial cash flow below:Round to the nearest dollar.)

1	(1)	$
2	(2)	$
3	(3)	$
4	Free Cash Flow	$

(1)

Capital Expenditure (outfit of space)

Capital Expenditure (price of space)

Change in Net Working Capital

Feasibility Study Cost

Opportunity Cost

(2)

Capital Expenditure (outfit of space)

Capital Expenditure (price of space)

Change in Net Working Capital

Feasibility Study Cost

Opportunity Cost

(3)

Capital Expenditure (outfit of space)

Capital Expenditure (price of space)

Change in Net Working Capital

Feasibility Study Cost

Opportunity Cost

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