The Claussens are considering the purchase of a hardware store. The Claussens anticipate that the store will generate cash flows of $$84,000$ per year for $20$ years. At the end of $20$ years, they intend to sell the store for an estimated $$540,000.$ The Claussens will finance the investment with a variable rate mortgage. Interest rates will increase twice during the $20-$year life of the mortgage. Accordingly, the Claussens desired rate of return on this investment varies as follows:

Years $156\%$

Years $6108\%$

Years $112010\%$

Required:

What is the maximum amount the Claussens should pay for the hardware store? $($Assume that all cash flows occur at the end of the year.$)$

 

Answer rating: 100% (QA)

Answer Absolutely lets calculate the present values and find the maximum investment amount for the C... View the full answer