Beverly's is a retail chain selling the latest fashions through its outlets located in various neighborhood malls. Clothing Galore is a wholesaler that buys from textile mills and sells to retail outlets. Beverly's has a cost of capital of 13.6 percent, while Clothing Galore's cost of capital is 17.8 percent. Both firms are considering opening a retail outlet in a gigantic new mall. Both proposals are quite similar in design and have basically the following financial features: an initial cash outlay of $2.7 million, a projected 5-year life with no salvage value, and cash inflows of $845,000 a year for the life of the project. Which firm or firms, if either, should open a retail outlet in the new mall?

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The Answer of Beverly's is a retail chain selling the latest fashions through its outlets located in various neighborhood malls. Clothing Galore is a wholesaler that buys from textile mills and sells to retail outlets. Beverly's has a cost of capital of 13.6 percent, while Clothing Galore's cost of capital is 17.8 percent. Both firms are considering opening a retail outlet in a gigantic new mall. Both proposals are quite similar in design and have basically the following financial features: an initial cash outlay of $2.7 million, a projected 5-year life with no salvage value, and cash inflows of $845,000 a year for the life of the project. Which firm or firms, if either, should open a retail outlet in the new mall?

Beverly's Is a Retail Chain Selling the Latest Fashions Through