Question

Woody Lightyear is considering the purchase of a toy store from Andy Enterprises. Woody expects the store will generate net cash flows (cash inflows less cash outflows) of $60,000 per year for 20 years. At the end of the 20 years, he intends to sell the store for $600,000. To finance the purchase, Woody will borrow using a 20-year note that requires 9% interest.

Required:
What is the maximum amount Woody should offer Andy for the toy store? (Assume all cash flows occur at the end of each year.)



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  • CreatedJuly 15, 2014
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