You have just completed a feasibility study for a new coffee shop in some retail space you own. You bought the space two years ago for , and if you sold it today, you would net after taxes. Outfitting the space for a coffee shop would require a capital expenditure of plus an initial investment of in inventory. What is the correct initial cash flow for your analysis of the coffee shop opportunity?.

Question

04-11-2022
Business

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You have just completed a feasibility study for a new coffee shop in some retail space you own. You bought the space two years ago for , and if you sold it today, you would net after taxes. Outfitting the space for a coffee shop would require a capital expenditure of plus an initial investment of in inventory. What is the correct initial cash flow for your analysis of the coffee shop opportunity?.

Answer :

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varshamittal029 varshamittal029 · Answer 1 · 2022-11-16T09:59:36-05:00

Your recognition of relevant cash flows is accurate.

Find below the calculation of initial cash flow below:
Capital expenditure (outfit of space) $25,000
Change in net worth capital (i.e inventory cost) $4,600
Opportunity cost ($111,000 that would have been $111,000
received)
Free Cash flow $140,600

Cash flow- The net balance of cash moving into and out of a business at a given point in time is referred to as cash flow. A business's cash flow is constantly in and out. When a retailer buys inventory, for example, money leaves the company and goes to its suppliers.

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