Question

You have just completed a $ 19,000 feasibility study for a new coffee shop in some retail space you own. You bought the space two years ago for $ 97,000​, and if you sold it​ today, you would net $ 111,000 after taxes. Outfitting the space for a coffee shop would require a capital expenditure of $ 31,000 plus an initial investment of $ 4,700 in inventory. What is the correct initial cash flow for your analysis of the coffee shop​ opportunity?

Answer 1

$146,700

Step-by-step explanation:

The computation of the correct initial cash flow is shown below:

Expected after tax cash flows from sale of space $111,000

Add: Increase in working capital $4,700

Add: Outfitting expenses $31,000

Initial cash flow $146,700

We simply added the above expenses so that the initial cash flow could come i.e to be shown in the computation part