A retailer is considering opening a new store as a business venture. The purchase price of the store will be $2 million and there will be a further investment required of $0.5 million six months after purchase. The store will open one year after purchase. Revenues less running costs are expected to occur continuously and will be $0.1 million in the first year of operation, $0.15 million in the second year of operation and thereafter increasing at yearly intervals by 2.0% per annum compound. Eight years after purchase, a major refit costing $0.8 million will be required. Twenty-one years after purchase, it is assumed that the store will be closed and sold for $6 million. The retailer requires a rate of return on its investment of 7.0% per annum effective. Which of the following is the accumulated profit the retailer will have made at the end of the term? $867,113.1 $1,391,845.76 $1,468,794.21 $1,577,605.94 $1,696,537.16 $1,765,078.73 $1,941,735.44 $1,965,730.23 $1,973,357.33 $2,212,835.82
A retailer is considering opening a new store as a business venture. The purchase price of the store will be $2 million and there will be a further investment required of $0.5 million six months after purchase. The store will open one year after purchase. Revenues less running costs are expected to occur continuously and will be $0.1 million in the first year of operation, $0.15 million in the second year of operation and thereafter increasing at yearly intervals by 2.0% per annum compound. Eight years after purchase, a major refit costing $0.8 million will be required. Twenty-one years after purchase, it is assumed that the store will be closed and sold for $6 million. The retailer requires a rate of return on its investment of 7.0% per annum effective. Which of the following is the accumulated profit the retailer will have made at the end of the term? $867,113.1 $1,391,845.76 $1,468,794.21 $1,577,605.94 $1,696,537.16 $1,765,078.73 $1,941,735.44 $1,965,730.23 $1,973,357.33 $2,212,835.82
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A retailer is considering opening a new store as a business venture. The purchase price of the store will be $2 million and there will be a further investment required of $0.5 million six months after purchase.
The store will open one year after purchase. Revenues less running costs are expected to occur continuously and will be $0.1 million in the first year of operation, $0.15 million in the second year of operation and thereafter increasing at yearly intervals by 2.0% per annum compound.
Eight years after purchase, a major refit costing $0.8 million will be required. Twenty-one years after purchase, it is assumed that the store will be closed and sold for $6 million.
The retailer requires a rate ofreturn on its investment of 7.0% per annum effective.
Which of the following is theaccumulated profit the retailer will have made at the end of the term?$867,113.1$1,391,845.76$1,468,794.21$1,577,605.94$1,696,537.16$1,765,078.73$1,941,735.44$1,965,730.23$1,973,357.33$2,212,835.82
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