Table 5.1 shows the store’s income statement one month before the…

Table 5.1 shows the store’s income statement one month before the new mall opened and four months after it opened. Looking at the bottom line, we can see the store earned an after-tax profit of $32,900 before the opening of the new mall, but lost $-10,254 four months after the new mall opened for business. At first glance, it seems obvious that the store should close its doors. The shoe store was thriving before the new mall was built, it is likely to continue to lose money in its present location. Based on the information given, forecast the next year for the store.
Table 5.1: Income statement before and after the New Mall Opens.
Income statement one month before the new mall opens. In millions (000)
Income statement four months after the new mall opens.
In millions (000)
Revenues
$223, 786
$75,670
Cost of goods sold
129,796
$43,889
Gross Margin
$93,990
$31,781
Sales and marketing expense
9,957
12,265
General and administrative expenses:
Payroll
$21,530
20,120
Depreciation
$2,250
2,250
Rents – Fixed
5,000
5,000
Rents – percentage
2,238
0
Insurance
1,200
1,200
Profits before interest and taxes
$51,815
($9,054)
Interest payments
1,200
1,200
Profit before taxes
$50,615
$(10,254)
Taxes are based on revenue and so are a relevant cash flow
$17,715
0
Profit after taxes
$32,900
($10,254)

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