Capital Budgeting

  A bizarre but absolute coffee shop, the Hot New Café, wants to body a new café for added capacity. Accede the afterward banking aspects of this endeavor: Expected sales are $800,000 for the aboriginal 5 years. Direct costs, including activity and materials, will be 50% of sales. Indirect costs are estimated at $200,000 a year. The amount of the architecture for the new café will be a absolute of $850,000, which will be attenuated beeline band over the abutting 5 years. The firm's bordering tax amount is 38%, and its amount of basic is 10%. For this assignment, you charge to advance a basic budget. It is important to apperceive what the café managers should accede aural their basic budget. You charge additionally ascertain the key agreement all-important to accept basic budgeting. In this assignment, amuse appearance all work, including formulae and calculations acclimated to access at banking values. You charge acknowledgment the afterward application the advice above: Prepare a basic account for the Hot New Café with the net banknote flows for this activity over a 5-year period.  Calculate the aftereffect aeon (P/B) and the net present amount (NPV) for the project.  Answer the afterward questions based on your P/B and NPV calculations:  Do you anticipate the activity should be accepted? Why?  Define and call net present amount (NPV) as it pertains to the new cafe.  Assume the aggregation has a P/B (payback) action of not accepting projects with a activity of over 3 years. Do you anticipate the activity should be accepted? Why? Your submitted appointment charge accommodate the following: A double-spaced, 2-page Word certificate that contains answers to the questions.  You charge accommodate a Microsoft Excel spreadsheet for your calculations.  Either the Word certificate or the Excel spreadsheet charge accept all of your adding values, your complete calculations, any formulae that you used, the sources you ambition to cite, and your answers to the questions listed in the appointment guidelines.

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