Roche Brothers is considering a capacity expansion of its supermarket. The landowner will build the addition to suit in return for $225,000 upon completion and a five-year lease. The increase in rent for the addition is $10,000 per month. The annual sales projected through year 5 follow. The current effective capacity is equivalent to 500,000 customers per year. Assume a 2 2 percent pretax profit on sales.
a. If Roche expands its capacity to serve 700,000 customers per year now (end of year 0), what are the projected annual incremental pretax cash flows attributable to this expansion? The projected annual incremental pretax cash flows attributable to this expansion in year 0 are $−225000. (Enter your response as an integer.)
The projected annual incremental pretax cash flows attributable to this expansion in year 1 are $____________ . (Enter your response as an integer.
Year
|
1
|
2
|
3
|
4
|
5
| |
Customers
|
560,000
|
600,000
|
675,000
|
700,000
|
715,000
| |
Average Sales per Customer
|
$51
|
$53
|
$58
|
$62
|
$64
|
