1 ) David Johnson is considering starting a small catering business. He would invest $ 1 2...
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Question:
David Johnson is considering starting a small catering business. He would invest $ to purchase a delivery van and various equipment and another $ for inventories and other working capital needs. Rent for the building used by the business will be $ per year. In addition to the building rent, annual cash outflow for operating costs will amount to $ The annual cash inflow from the business will amount to $ Jim wants to operate the catering business for only six years. He estimates that the equipment could be sold at that time for of its original cost. Jim uses a discount rate. All cash flows, except for the initial investment, would occur at the ends of the years. The investment in working capital would be returned at the end of the six years. Ignore income taxes. Use discount factor of for years and for year
: Compute the net present value of this investment. Show schedule.
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