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You have just completed a $20,000 feasibility study for a new coffee shop in some retail space you own. You bought the space two years ago for $100,000, but if you sold it today, you would net $115,000 after taxes. Outfitting the space for a coffee shop would require a capital expenditure of $30,000 plus an initial investment of $5,000 in inventory. What is the initial incremental cash flow for opening the coffee shop today? Answer a negative number if the cash flow is a cost.

Respuesta :

Answer:

$150,000

Explanation:

Data provided

Expected after tax cash flows from sale of space = $115,000

Increase in working capital = $5,000

Outfitting expenses = $30,000

The calculation of initial incremental cash flow is shown below:-

Initial incremental cash flow = Expected after tax cash flows from sale of space + Increase in working capital + Outfitting expenses

= $115,000 + $5,000 + $30,000

= $150,000

So, for calculating the initial incremental cash flow we simply applied the above formula.

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