Bruce is considering the purchase of a restaurant named Hard Rock Hollywood. The restaurant is listed for sale at $1,030,000. 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 $ 83,000 (each year) 7 93,000 8 103,000 9 113,000 10 123,000 Bruce expects to sell the restaurant after 10 years for an estimated $1,130,000. (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 10% annually on his investment. (Assume all cash flows occur at the end of each year.) 1-b. Should he purchase the restaurant?
Bruce is considering the purchase of a restaurant named Hard Rock Hollywood. The restaurant is listed for sale at $1,030,000. With the help of his accountant, Bruce projects the net cash flows (
| Years | Amount | |||
| 1-6 | $ | 83,000 | (each year) | |
| 7 | 93,000 | |||
| 8 | 103,000 | |||
| 9 | 113,000 | |||
| 10 | 123,000 | |||
Bruce expects to sell the restaurant after 10 years for an estimated $1,130,000. (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
1-b. Should he purchase the restaurant?
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