Donna Clark wants to open a restaurant in a historic building. The property can be leased for 20 years but not purchased. She believes her restaurant can generate a net cash flow of $75,000 the first year and expects an annual growth rate of 4 percent thereafter. If a discount rate of 17 percent is used to evaluate this business, what is the present value of the cash flows that it will generate? (Round factor values to 5 decimal places, e.g. 1.52145 and final answer to 2 decimal places, e.g. 52.75.) Present value $

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
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Donna Clark wants to open a restaurant in a historic building. The property can be leased for 20 years but not purchased. She
believes her restaurant can generate a net cash flow of $75,000 the first year and expects an annual growth rate of 4 percent
thereafter. If a discount rate of 17 percent is used to evaluate this business, what is the present value of the cash flows that it will
generate? (Round factor values to 5 decimal places, e.g. 1.52145 and final answer to 2 decimal places, e.g. 52.75.)
Present value
tA
Transcribed Image Text:Donna Clark wants to open a restaurant in a historic building. The property can be leased for 20 years but not purchased. She believes her restaurant can generate a net cash flow of $75,000 the first year and expects an annual growth rate of 4 percent thereafter. If a discount rate of 17 percent is used to evaluate this business, what is the present value of the cash flows that it will generate? (Round factor values to 5 decimal places, e.g. 1.52145 and final answer to 2 decimal places, e.g. 52.75.) Present value tA
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