Retail Outlet Is Looking for a New Location near a Shopping

question 74

Essay

Retail Outlet is looking for a new location near a shopping mall.It is considering purchasing a building rather than leasing,as it has done in the past.Three retail buildings near a new mall are available but each has its own advantages and disadvantages.The owner of the company has completed an analysis of each location that includes considerations for the time value of money.The information is as follows:
$$\begin{array} { | l | c | c | c | } \hline & \text { Location A } & \text { Location B } & \text { Location C } \\\hline \text { Internal rate of return } & 13 \% & 17 \% & 20 \% \\\hline \text { Net present value } & \$ 25,000 & \$ 40,000 & \$ 20,000 \\\hline\end{array}$$ The owner does not understand how the location with the highest percentage return has the lowest net present value.
Required:
Explain to the owner what is (are)the probable cause(s)of the comparable differences.

Understand the operational mechanics behind retailing, including buying, inventory management, and store layout.

Grasp the significance of service level in different retail settings.

Identify the characteristics and strategies of different types of nonstore retailing.

Understand the importance of price positioning and inventory turnover in retail strategy.

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Definitions:

Cash Budget

A financial plan that estimates cash inflows and outflows over a specific period to ensure a company has sufficient liquidity.

Financial Statements

Formal records of a company's financial activities and condition, including balance sheet, income statement, and cash flow statement.

Fixed Assets

Fixed Assets, also known as non-current assets, are long-term tangible assets held for business use and not expected to be converted into cash in the upcoming year, such as buildings, machinery, and vehicles.

Sales Increase

The rise in the volume or amount of sales or services sold by a company within a particular period.