Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. suppose that home depot decides to add a coffee sh

Suppose that Home Depot decides to add a coffee shop in the middle of the store...

Free

70.2K

Verified Solution

Question

Finance

Suppose that Home Depot decides to add a coffee shop in themiddle of the store to encourage more browsing by customers. Thisbusiness will hire some additional employees, but analysts believethe coffee shop will require the store general manager to work 15more hours per week. This will increase the general manager’ssalary by $15,862.00 per year. Home Depot has a 40.00% tax rate, a12.00% cost of capital, and is evaluating this project over a6.00-year period. What is the net opportunity cost to adding thecoffee shop? (HINT: Value the extra gain in the manager’s salary.EXPRESS as a positive number)

Answer & Explanation Solved by verified expert
3.5 Ratings (574 Votes)

computation of opportunity cost
Increase in manager salary = 15,862
Tax rate = 40%
Post tax increase in salary = 15862*(1-40%) 9517.2
Computation of present value of post tax increase in salary
i ii iii=i*ii
year Post tax salary PVIF @ 12% present value
1 9517.2 0.8928571         8,497.50
2 9517.2 0.7971939         7,587.05
3 9517.2 0.7117802         6,774.15
4 9517.2 0.6355181         6,048.35
5 9517.2 0.5674269         5,400.31
6 9517.2 0.5066311         4,821.71
      39,129.09
therefore opportunity cost =         39,129.09
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Chemistry
1.2K views

1. What is the pH at the equivalence point in the titration of a 18.7 mL...

Accounting
1.2K views

lizabeth, David and Ethan form a new partnership (EDE) to which Elizabeth and David each contribute...

Biology
1.2K views

B s SC BIOL1001 P Biology II E

Biology
1.2K views

Adenosine triphosphate (ATP) molecules are used for the synthesis of a large number of biomolecules....

Biology
1.2K views

By Kolj 100 BYD Op E F B Which geographic region did Franz Ferdinand represent...

Basic Math
1.2K views

Show that the given transformation from R2 to R2 is linear by showing that it...

Accounting
1.2K views

Required:1.Prepare a statement of cost of goods manufactured.2.Prepare a statement of cost of goods sold....

Accounting
1.2K views

Acme Materials Company manufactures and sells synthetic coatings that can withstand high temperatures....

Accounting
1.2K views

Q8.20: The sum of the balances of individual accounts receivable for all of the customers...

Accounting
1.2K views

Im stuck on this problem. Attached is the problem. Magenta Company, which right...

Accounting
1.2K views

Which of the following standard is used by the United States companies? Select one or...

Accounting
1.2K views

Gruden Company produces golf discs, which it normally sells to retailers for $12 each. The...