Business, 25.03.2020 23:26 heberavilesramirez52

John wiggins is considering the purchase of a small restaurant. the purchase price listed by the seller is $800,000. john has used past financial information to estimate that the net cash flows (cash inflows less cash outflows) generated by the restaurant would be as follows:

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Answer from: Relesses

Since NPV is negative (-$73,835.60), the project should be rejected.

Explanation:

Years Amount

0 -$800,000

1–6 $80,000

7 $70,000

8 $60,000

9 $50,000

10 $740,000

In order to determine if this is a good investment or not, we need to calculate the net present value (NPV). If NPV ≥ 0, then the project is good, it NPV is negative, then the project should be rejected.

I will use an excel spreadsheet to calculate the NPV with a 10% discount rate.

We must first determine the present value of the cash flows and then subtract the investment from it.

The present value of the cash flows = $726,164.60 and obviously its smaller than the initial investment: $726,164.60 - $800,000 = -$73,835.60

Since NPV is negative, the project should be rejected.

Answer from: Quest

you will have $2593.74 in 10 years if you set aside $1,000 at 10%

you will have $9321.91 in 20 years if you set aside $2000 at 8%

you will have $1469.32 in 5 years if you set aside $1000 at 8%

you will have $1296.87 in 10 years if you set aside $500 at 10%

you will have $239.66 in 15 years if you set aside $100 at 6%

you will have $4660.96 in 20 years if you set aside $1000 at 8%

Answer from: Quest

The answer is b) market forces

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