A Video Rental Store Will Cost $650,000 to Open $\pm$ 0% from Their Original Estimates

Essay

A video rental store will cost $650,000 to open.Assuming annual sales of $1 million,variable costs of 35%,fixed costs of $300,000,depreciation of $100,000,and a tax rate of 35%,calculate the NPV of the project over a 10-year horizon (no inflation or salvage value assumed)with a 12% cost of capital.Conduct a sensitivity analysis by allowing investment,sales,variable costs,and fixed costs to vary by $\pm$ 0% from their original estimates.Which variable appears to affect profitability the most?