HighJump Inc

question 6

Essay

HighJump Inc. is considering partnering with FieldFeet to open "Athlete Heaven" stores in the United States as it seeks to expand its own retail network to better control how its products are displayed and sold. One particular store will require an initial investment of
$220,000 and an annual operating cost of $59,000. The buildings and equipment will have a
$62,500 resale value after 10 years. HighJump expects the store to generate annual revenue of $69,000. Calculate the future worth of the investment in this particular store at the end of year 10, and determine the acceptability of the investment if the company's minimum attractive rate of return is 8% per year.

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Definitions:

Net Sales Revenue

The amount of revenue generated from sales after deducting returns, allowances for damaged goods, and discounts.

Earnings Per Share

A financial ratio that measures the amount of a company's net income allocated to each outstanding share of common stock.

Treasury Stock

A corporation’s own stock that has been repurchased. Shares held as treasury stock are considered issued shares but not outstanding shares.

Net Profit Margin Ratio

A financial metric that shows what percentage of a company's revenues is left over after all expenses have been deducted.