Hazal reached an agreement to purchase a store in Kadikoy. Hazal pays $3.7 million now for the store and intends to operate the shop as a patisserie for 6 years before selling it for $4.7 million.

(To answer part a and part b, ignore the shop’s profits and losses)

a. Given an interest rate of 6% calculate the present value of the sales price of the store at the end of 6 years?

b. Should Hazal buy the store?

c-1. What is the present value of future cash flows if Hazal could also profit $270,000 per year from the patisserie? Assume that the annual profits are collected at the year-end until the end of 6 years.

c-2. Should Hazal buy the store if she receives the annual profits stated in c-1?

Answer rating: 100% (QA)

A Given an interest rate of 6 the present value of the sales price of the store at the end of 6 year... View the full answer