Ending 2017 Revenue = 22,386,800 Adam Corp. is considering opening 100 new store

Question

Ending 2017 Revenue = 22,386,800

Adam Corp. is considering opening 100 new stores that would represent an increase in sales of 7% (for the first year) over their last year-end figures. After the 1st year revenues are expected to grow at a 4% per year.

(MACRS for other questions)

1. Estimate the Revenues for the stand-alone (only the project and not for the whole company) for the next 5 years. After the 1st year revenues are expected to grow at a 4% per. year.

PLEASE SHOW ALL CALULATIONS. THANKS

Ending 2017 Revenue = 22,386,800

Adam Corp. is considering opening 100 new stores that would represent an increase in sales of 7% (for the first year) over their last year-end figures. After the 1st year revenues are expected to grow at a 4% per year.

They would need to invest on average $300,000 per store. The investment would depreciate in 7 years. After the 5 years, only part of their investment can be sold for $ 10,000,000.
Net Working Capital to start will be 100,000 per store and then it will be a 10% of the increase of Sales of all 100 new stores. 9993236 24449994 Y 44728884 7 1211 3 2557 Y 029115 5 23111 r 3511 3484 Y 3447 12345678

Explanation / Answer

Here the term project implies the 100 new stores being opened.

First year revenue = 22,386,800 * 7% = 1,567,076

Second year revenue = 1,567,076 ( 1.04) = 1,629,759

Third Year revenue = 1,629,759 ( 1.04) = 1,694,949

Fourth Year revenue = 1,694,949 ( 1.04) = 1,762,747

Fifth Year revenue = 1,762,747 ( 1.04) = 1,833,257

Note : For estimating the Revenues we should not do any adjustments regarding depreciation and working capital. They have to be considered only when cash flows have to be estimated.

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