Bruce is considering the purchase of a restaurant named Hard Rock Hollywood. 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 to 6 $94,000 (each year) 7 104,000 8 114,000 9 10 124,000 134,000 Bruce expects to sell the restaurant after 10 years for an estimated $1,240,000. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use tables, Excel, or a financial calculator. 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. Be sure to include the selling price in your calculation.) 1-b. Assuming the restaurant is listed for sale at $1,050,000, should he purchase the restaurant? Complete this question by entering your answers in the tabs below. Req 1A Req 1B 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. Be sure to include the selling price in your calculation.) Total present value
Bruce is considering the purchase of a restaurant named Hard Rock Hollywood. 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 to 6 $94,000 (each year) 7 104,000 8 114,000 9 10 124,000 134,000 Bruce expects to sell the restaurant after 10 years for an estimated $1,240,000. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use tables, Excel, or a financial calculator. 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. Be sure to include the selling price in your calculation.) 1-b. Assuming the restaurant is listed for sale at $1,050,000, should he purchase the restaurant? Complete this question by entering your answers in the tabs below. Req 1A Req 1B 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. Be sure to include the selling price in your calculation.) Total present value
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Ashvin
Transcribed Image Text:Bruce is considering the purchase of a restaurant named Hard Rock Hollywood. 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 to 6
$94,000 (each year)
7
104,000
8
114,000
9
10
124,000
134,000
Bruce expects to sell the restaurant after 10 years for an estimated $1,240,000. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use
tables, Excel, or a financial calculator. 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. Be sure to include the selling price in your calculation.)
1-b. Assuming the restaurant is listed for sale at $1,050,000, should he purchase the restaurant?
Complete this question by entering your answers in the tabs below.
Req 1A
Req 1B
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. Be sure to include the selling price in your calculation.)
Total present value
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