You Are Opening Up a Brand New Retail Strip Mall

question 37

Multiple Choice

You are opening up a brand new retail strip mall. You presently have more potential retail outlets wanting to locate in your mall than you have space available. What is the most appropriate tool to use if you are trying to determine the optimal allocation of your retail space?

• A) internal rate of return (IRR)
• B) payback period
• C) net present value (NPV)
• D) profitability index

---

Definitions:

Discount Rate

It’s the interest rate applied for determining the current value of cash flows expected in the future through discounted cash flow analysis.

Depreciation Tax Shield

A reduction in taxable income that results from taking the depreciation expense as a tax deduction, thus reducing the firm's tax liability.

Corporate Tax Rate

The corporate tax rate is the percentage of a corporation's taxable income that it must pay to the government, which varies by country and sometimes within regions of countries.

Bottom-Up Approach

A strategy that starts at the operational or project level and works up to the top levels of management for decision-making.