Helga is considering the purchase of a small restaurant. The purchase price listed by the seller is $900,000. Helga has used past financial information to estimate that the net cash flows (cash inflows less cash outflows) generated by the restaurant would be as follows: Years 1-6 7 8 9 10 Amount $ 90,000 80,000 70,000 60,000 50,000 If purchased, the restaurant would be held for 10 years and then sold for an estimated $800,000. Required: Determine the present value, assuming that Helga desires a 9% rate of return on this investment. (Assume that all cash flows occur at the end of the year.) Note: Do not round intermediate calculations. Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Future Amount $ 90,000 80,000 70,000 60,000 50,000 800,000 9% 9% 9% 9% 9% 9% n= Present Value Should the restaurant be purchased?

Helga is considering the purchase of a small restaurant. The purchase price listed by the seller is $900,000. Helga has used past financial information to estimate that the net cash flows (cash inflows less cash outflows) generated by the restaurant would be as follows: Years 1-6 7 8 9 10 Amount $ 90,000 80,000 70,000 60,000 50,000 If purchased, the restaurant would be held for 10 years and then sold for an estimated $800,000. Required: Determine the present value, assuming that Helga desires a 9% rate of return on this investment. (Assume that all cash flows occur at the end of the year.) Note: Do not round intermediate calculations. Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Future Amount $ 90,000 80,000 70,000 60,000 50,000 800,000 9% 9% 9% 9% 9% 9% n= Present Value Should the restaurant be purchased?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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