22. John Wiggins is considering the purchase of a small restaurant. The purchase price listed by the seller is $840,000. John 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: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Amount$84, 000Years1-6774, 00064,00054, 00044,000810If purchased, the restaurant would be held for 10 years and then sold for an estimated $740,000.Required:Determine the present value, assuming that John desires an 11% rate of return on this investment. (Assume that all cash flows occur atthe end of the year.) (Do not round intermediate calculations. Round your final answers to nearest whole dollar amount.)Future Amounti =n =Present Value84,00011%74,00011%64,00011%54,00011%44,00011%740,00011%Should the restaurant be purchased?

Name: 22. John Wiggins is considering the purchase of a small restaurant. Th
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Description: 22. John Wiggins is considering the purchase of a small restaurant. The purchase price listed by the seller is $840,000. John has used past financial information to estimate that the net cash flows (cash inflows less cash outflows) generated by the r

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Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 18EB: Garnette Corp is considering the purchase of a new machine that will cost $342,000 and provide the...

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22. John Wiggins is considering the purchase of a small restaurant. The purchase price listed by the seller is $840,000. John 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: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Amount
$84, 000
Years
1-6
7
74, 000
64,000
54, 000
44,000
8
10
If purchased, the restaurant would be held for 10 years and then sold for an estimated $740,000.
Required:
Determine the present value, assuming that John desires an 11% rate of return on this investment. (Assume that all cash flows occur at
the end of the year.) (Do not round intermediate calculations. Round your final answers to nearest whole dollar amount.)
Future Amount
i =
n =
Present Value
84,000
11%
74,000
11%
64,000
11%
54,000
11%
44,000
11%
740,000
11%
Should the restaurant be purchased?

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Present value is the current value of future value cash flows at specified interest rate.

Present value is calculated by discounting future cash flow at stated interest rate for relevant period.

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