present value of the revenue from the business over ten years? Would you invest in the business?

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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Homework Question 2: 2) Tee-Shirt Company: You are thinking about starting a new tee-shirt company using laser printing technology. The expected profit from the business is $5,000 per year from (T=1 to T=10). The investment cost to start the business is $25,000 (at T=0).

In year ten (T=10), you expect that you can sell the laser printing machine for $10,000.

Using an interest rate R=6%, answer the following questions:

  1. What is the present value of the revenue from the business over ten years?
  2. Would you invest in the business?
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