Mert and his team are negotiating with RifleLock, which is a startup that produces smart locks. They're planning to make an initial investment of 1700000? to purchase new equipment for smart lock production. They expect to generate yearly revenue of 195,000 ? while incurring annual costs of 135,000 ?. Their plan is to sell the company for 6,500,000 ? in the sixth year. Please refer to tables A1, B1 and B2 as necessary. Keep in mind that the expected rate of return is 25%. A)What is the cashflow in year 6?,B)Report the amount of money that exceeded Granny's Home Appliances' expectations in terms of today.,C)What is the internal rate of return of this business?,d)What would be the IRR if the annual revenue were increased by 36% ? (Do not forget to change the annual revenue back to its original value.)  

Transcribed Image Text:

Initial Investment Annual Revenue Annual Costs Table A-1 $1,700,000.00 $195,000.00 $135,000.00 Selling Price $6,500,000.00 Expected Rate of Return 25.00% Year Revenue 0 1 2 3 4 5 6 Table B-1 Cost Cash Flow NPV IRR Initial Investment Annual Revenue Annual Costs Table A-1 $1,700,000.00 $195,000.00 $135,000.00 Selling Price $6,500,000.00 Expected Rate of Return 25.00% Year Revenue 0 1 2 3 4 5 6 Table B-1 Cost Cash Flow NPV IRR

Answer rating: 100% (QA)

Okay lets calculate the cash flow in year 6 the amount of money that exceeded Grannys Home Appliance... View the full answer