Helga is considering the purchase of a small restaurant. The purchase price listed by the seller is $930,000. 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 7 B 9 10 Amount $ 93,000 83,000 73,000 63,000 53,000 If purchased, the restaurant would be held for 10 years and then sold for an estimated $830,000. 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. (EY of $1. PV of $1. FVA of $1. PVA of $1. EVAD of $1 and EVAD of $1 Present Value S Future Amount 93,000 83.000 73,000 63,000 53.000 830,000 9% 9% 9% 9% 9% 9% Should the restaurant be purchased? S 0

Helga is considering the purchase of a small restaurant. The purchase price listed by the seller is $930,000. 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 7 B 9 10 Amount $ 93,000 83,000 73,000 63,000 53,000 If purchased, the restaurant would be held for 10 years and then sold for an estimated $830,000. 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. (EY of $1. PV of $1. FVA of $1. PVA of $1. EVAD of $1 and EVAD of $1 Present Value S Future Amount 93,000 83.000 73,000 63,000 53.000 830,000 9% 9% 9% 9% 9% 9% Should the restaurant be purchased? S 0

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter11: Property Dispositions

Section: Chapter Questions

Problem 24P

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Helga is considering the purchase of a small restaurant. The purchase price listed by the seller is $890,000. 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 $ 89,000 79,000 69,000 59,000 49,000 If purchased, the restaurant would be held for 10 years and then sold for an estimated $790,000. Required: Determine the present value, assuming that Helga desires an 11% rate of return on this investment. (Assume that all cash flows occur at the end of the year.)
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Subject: acounting
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