Pet Grooming Business Opportunity You have an opportunity to buy a business for $35,000. The business...
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Pet Grooming Business Opportunity You have an opportunity to buy a business for $35,000. The business is a portable pet grooming business. It comes with a van complete with everything needed to groom pets anywhere. The owner hired students to groom the pets. The business owner is graduating from college and wants to sell. The business has paid the owner's tuition, books, fees, and rent for the last three years. The net income was $13,000 per year. You have $35,000 in your college fund. You are planning on going for a PhD and believe you can graduate in 8 years. You are conservative and estimate the business will generate the following net income for the next eight years. Year 1 2345678 Income $10,000 $11,000 $12,000 $13,000 $13,000 $13,500 $14,000 $14,500 What return would you have to get on the $35,000 to equal the income from buying the business. (Hint: use the IRR function. The internal rate of return calculated by IRR is the interest rate corresponding to a 0 (zero) net present value.) Double check this by finding the NPV of the cash flows using the interest rate calculated by the IRR. Pet Grooming Business Opportunity You have an opportunity to buy a business for $35,000. The business is a portable pet grooming business. It comes with a van complete with everything needed to groom pets anywhere. The owner hired students to groom the pets. The business owner is graduating from college and wants to sell. The business has paid the owner's tuition, books, fees, and rent for the last three years. The net income was $13,000 per year. You have $35,000 in your college fund. You are planning on going for a PhD and believe you can graduate in 8 years. You are conservative and estimate the business will generate the following net income for the next eight years. Year 1 2345678 Income $10,000 $11,000 $12,000 $13,000 $13,000 $13,500 $14,000 $14,500 What return would you have to get on the $35,000 to equal the income from buying the business. (Hint: use the IRR function. The internal rate of return calculated by IRR is the interest rate corresponding to a 0 (zero) net present value.) Double check this by finding the NPV of the cash flows using the interest rate calculated by the IRR.
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