A Video Rental Store Will Cost $650,000 to Open

question 116

Essay

A video rental store will cost $650,000 to open.Assuming annual sales of $1 million, variable costs of 35 percent, fixed costs of $300,000, depreciation of $100,000, and a tax rate of 35 percent, calculate the NPV of the project over a 10-year horizon (no inflation or salvage value assumed) with a 12 percent cost of capital.Conduct a sensitivity analysis by allowing investment, sales, variable costs, and fixed costs to vary by plus/minus 10 percent from their original estimates.Which variable appears to affect profitability the most? What does the sensitivity analysis suggest the investor do?

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Definitions:

Editing Stage

The phase in the writing process where content is reviewed and revised for clarity, coherence, grammar, and accuracy.

Serif Fonts

Serif fonts are typefaces that feature small lines or strokes attached to the end of larger strokes in letters, often used to enhance readability in printed text.

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Broad Margins

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