Info

Increased Revenues

\$500,000

\$550,000

\$605,000

\$665,500

\$732,050

Operating Margin

10.00%

10.00%

10.00%

10.00%

10.00%

Operating Income

\$50,000

\$55,000

\$60,500

\$66,550

\$73,205

Operating Income after Taxes

\$29,000

\$31,900

\$35,090

\$38,599

\$42,459

PV of Cash Flows @ 12.14%

\$25,861

\$25,369

\$24,886

\$24,412

\$23,947

The present value of the incremental cash flows generated for the bookstore as a consequence of the cafe is \$124,474. Incorporating this into the present value analysis yields the following:

Net Present Value of Cafe = - \$86,413 + \$ 124,474 = \$38,061 Incorporating the cash flows from the synergy into the analysis, the cafe is a good investment for Bookscape.

Lessons From The Intelligent Investor

If you're like a lot of people watching the recession unfold, you have likely started to look at your finances under a microscope. Perhaps you have started saving the annual savings rate by people has started to recover a bit.

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