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Middleton Classics, a chain of exclusive furniture stores, is considering renting space in a new shopping mall. It is anticipated that this rental will require an investment in fixtures and equipment costing $500,000, with an estimated salvage value of $25,000 at the end of its useful life in ten years. The new store is expected to generate an annual net cash flow of $110,000. The owner desires a 20% annual return on investment and wants a payback period of less than four years. Ignore the impact of taxes. REQUIREMENT 1. Use the worksheet called CAPBUD that follows these requirements to evaluate this investment. Note that the investment information is already entered in the Data Section of the worksheet. Note also that there is a scratch pad at the bottom of the worksheet. The numbers in the scratch pad are needed as input to the net present value and internal rate of return calculations. Carefully review Appendix A in Excel Quick for instructions on using the =NPV and =IRR functions. 2. Open the file CAPBUD from the website for this book at cengagebrain.com. Enter the formulas where indicated. Enter your name in cell A1. Save the results as CAPBUD2 and print the worksheet when done. Also print your formulas. Check figure: Internal rate of return (cell E18), 17.95%. 3. Should Middleton Classics make the investment in the new store? Explain.

Scratch PadCash flow table needed forNPV & IRR calculationsNPVIRRAnnualSalvageCombinedYearCash FlowValueFlows0-5000001110000011000021100000110000311000001100004110000011000051100000110000611000001100007110000011000081100000110000911000001100001011000025000135000

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