A Video Rental Store Will Cost $650,000 to Open $\pm$ 0% from Their Original Estimates

question 86

Essay

A video rental store will cost $650,000 to open.Assuming annual sales of $1 million,variable costs of 35%,fixed costs of $300,000,depreciation of $100,000,and a tax rate of 35%,calculate the NPV of the project over a 10-year horizon (no inflation or salvage value assumed)with a 12% cost of capital.Conduct a sensitivity analysis by allowing investment,sales,variable costs,and fixed costs to vary by $\pm$ 0% from their original estimates.Which variable appears to affect profitability the most?

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Definitions:

Personal Construct Theory

A psychological theory developed by George Kelly, positing that individuals use personal constructs (bipolar dimensions of judgment) to understand and predict the world.

Construe Events

The process of interpreting and understanding events and situations in a particular way, based on personal beliefs, experiences, and perceptions.

Personal Choice

The ability of an individual to make decisions based on their preferences and values.

Construct

An abstract concept or theoretical tool used to understand and interpret aspects of observable behavior or psychological states.