Question

You have just completed a $ 24 comma 000 feasibility study for a new coffee shop in some retail space you own. You bought the space two years ago for $ 98 comma 000​, and if you sold it​ today, you would net $ 112 comma 000 after taxes. Outfitting the space for a coffee shop would require a capital expenditure of $ 33 comma 000 plus an initial investment of $ 5 comma 300 in inventory. What is the correct initial cash flow for your analysis of the coffee shop​ opportunity?

Answer 1

Answer:

$150,300

Explanation:

The computation of the correct initial cash flow is shown below:

= Capital expenditure + net after taxes + initial investment in inventory

= $33,000 + $112,000 + $5,300

= $150,300

The net after taxes is also term as opportunity cost

And, the initial investment in inventory is also term as change in working capital

All other information which is given is not relevant. Hence, ignored it