John Doe is thinking about investing in a coffee franchise that will need an initial expenditure of $75,000. He did his research and found that after-tax cash flows on the investment should be about $15,000 per year for the next 7 years. The franchiser stated that John Doe would generate a 20 percent return. His cost of capital is 10 percent. Find the following: the PVB the PVC the NPV
John Doe is thinking about investing in a coffee franchise that will need an initial expenditure of $75,000. He did his research and found that after-tax cash flows on the investment should be about $15,000 per year for the next 7 years. The franchiser stated that John Doe would generate a 20 percent return. His cost of capital is 10 percent. Find the following: the PVB the PVC the NPV
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
Section: Chapter Questions
Problem 1PS
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John Doe is thinking about investing in a coffee franchise that will need an initial expenditure of $75,000. He did his research and found that after-tax cash flows on the investment should be about $15,000 per year for the next 7 years. The franchiser stated that John Doe would generate a 20 percent return. His cost of capital is 10 percent.
Find the following:
- the PVB
- the PVC
- the
NPV - the
IRR (Hint: Use interpolation, IRR is between 8 percent and 10 percent.)
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