Helga is considering the purchase of a small restaurant. The purchase price listed by the seller...

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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 1-6 Amount $ 89,000 7 8 9 10 79,000 69,000 59,000 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.) Note: Do not round intermediate calculations. Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Future Amount |= n = Present Value $ 89,000 11% 79,000 11% 69,000 11% 59,000 11% 49,000 11% 790,000 11% Should the restaurant be purchased? 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 1-6 Amount $ 89,000 7 8 9 10 79,000 69,000 59,000 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.) Note: Do not round intermediate calculations. Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Future Amount |= n = Present Value $ 89,000 11% 79,000 11% 69,000 11% 59,000 11% 49,000 11% 790,000 11% Should the restaurant be purchased?

Answer rating: 100% (QA)

1 Present Value of Years 16 Cash flow 89000 per year Rate of return 11 Use the present value of an a... View the full answer