Bruce is considering the purchase of a restaurant named Hard Rock Hollywood. The restaurant is listed for sale at $1,010,000. With the help of his accountant, Bruce projects the net cash flows (cash inflows less cash outflows) from the restaurant to be the following amounts over the next 10 years: Years Amount 1-6 $ 81,000 (each year) 91,000 101,000 111,000 121,000 7 8 9 10 Bruce expects to sell the restaurant after 10 years for an estimated $1,110,000. (FV of $1, PV of $1. FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Round your answer to 2 decimal places.) Required: 1-a. Calculate the total present value of the net cash flows if Bruce wants to make at least 11% annually on his investment. (Assume all cash flows occur at the end of each year.)
Bruce is considering the purchase of a restaurant named Hard Rock Hollywood. The restaurant is listed for sale at $1,010,000. With the help of his accountant, Bruce projects the net cash flows (cash inflows less cash outflows) from the restaurant to be the following amounts over the next 10 years: Years Amount 1-6 $ 81,000 (each year) 91,000 101,000 111,000 121,000 7 8 9 10 Bruce expects to sell the restaurant after 10 years for an estimated $1,110,000. (FV of $1, PV of $1. FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Round your answer to 2 decimal places.) Required: 1-a. Calculate the total present value of the net cash flows if Bruce wants to make at least 11% annually on his investment. (Assume all cash flows occur at the end of each year.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Problem C-2A Consider present value (LOC-2, C-3)
Bruce is considering the purchase of a restaurant named Hard Rock Hollywood. The restaurant is listed for sale at $1,010,000. With the
help of his accountant, Bruce projects the net cash flows (cash inflows less cash outflows) from the restaurant to be the following
amounts over the next 10 years:
Years Amount
1-6 $ 81,000 (each year)
91,000
101,000
111,000
121,000
7
8
9
10
Bruce expects to sell the restaurant after 10 years for an estimated $1,110,000. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use
appropriate factor(s) from the tables provided. Round your answer to 2 decimal places.)
Required:
1-a. Calculate the total present value of the net cash flows if Bruce wants to make at least 11% annually on his investment. (Assume all
cash flows occur at the end of each year.)
Answer is complete but not entirely correct.
$ 1,526,335.20 x
Total present value
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