Future Amount	i =	n =	Present Value
$ 89,000	11%
79,000	11%
69,000	11%
59,000	11%
49,000	11%
790,000	11%
			$ 0
Should the restaurant be purchased?

Question

Helga is considering the purchase of a small restaurant. The purchase price listed by the seller is $890,000. Helga has used past financial information to estimate that the net cash flows (cash inflows less cash outflows) generated by the restaurant would be as follows:

Years	Amount
1-6	$ 89,000
7	79,000
8	69,000
9	59,000
10	49,000

If purchased, the restaurant would be held for 10 years and then sold for an estimated $790,000.

Required:

Determine the present value, assuming that Helga desires an 11% rate of return on this investment. (Assume that all cash flows occur at the end of the year.)