Use the Information Below to Answer the Following Question(s)

question 70

Multiple Choice

Use the information below to answer the following question(s) :
The owner of the Krusty Krab is considering selling his restaurant and retiring.An investor has offered to buy the Krusty Krab for $350,000 whenever the owner is ready for retirement.The owner is considering the following three alternatives:
1.Sell the restaurant now and retire.
2.Hire someone to manage the restaurant for the next year and retire.This will require the owner to spend $50,000 now,but will generate $100,000 in profit next year.In one year the owner will sell the restaurant for $350,000.
3.Scale back the restaurant's hours and ease into retirement over the next year.This will require the owner to spend $40,000 on expenses now,but will generate $75,000 in profit at the end of the year.In one year the owner will sell the restaurant for $350,000.
-If the interest rate is 7%,the alternative with the lowest NPV is:

• A)Alternative #1 with an NPV of approximately $350,000.
• B)Alternative #2 with an NPV of approximately $370,561.
• C)Alternative #3 with an NPV of approximately $357,196.
• D)Alternative #2 with an NPV of approximately $380,561.

Interpret the significance of profit, cash flows, and asset management in a firm's financial health.

Evaluate the firm's financial performance using ratio analysis.

Comprehend the relationship between sales, inventory, and the financial ratios.

Understand the significance of non-cash transactions and their reflection in financial statements.

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Definitions:

Proprietary Information

Information that is owned by an individual or a company, kept confidential, and not disclosed to the public to maintain competitive advantage.

Showrooming

The practice of visiting a store to view a product before buying it online at a lower price.

Informed Decision

A choice made after acquiring and understanding all relevant information, considering the options and consequences.

Recreational Shopping

The act of shopping for pleasure or entertainment, rather than out of necessity, often characterized by browsing without the immediate intent to purchase.