John Wiggins is considering the purchase of a small restaurant. The purchase price listed by the seller is $800,000. John 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 Amount 1–6 $ 80,000 7 70,000 8 60,000 9 50,000 10 40,000 If purchased, the restaurant would be held for 10 years and then sold for an estimated $700,000.Required:Assuming that John desires a 10% rate of return on this investment, should the restaurant be purchased? (Assume that all cash flows occur at the end of the year.)
John Wiggins is considering the purchase of a small restaurant. The purchase price listed by the seller is $800,000. John has used past financial information to estimate that the net
Years Amount
1–6 $ 80,000
7 70,000
8 60,000
9 50,000
10 40,000
If purchased, the restaurant would be held for 10 years and then sold for an estimated $700,000.
Required:
Assuming that John desires a 10% rate of
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