Problem 3: You are interested in buying a coffee shop. Your accountant provides you with the projected monthly income from the business for the next 2 years. In month 1 to 3: cash flow is -100, in month 4 to 9 cash flow is + 400, in month 10 to 16 cash flow is + 900 and in month 17 to 24 cash flow is + 1100. You have decided that your required rate of return on the coffee shop is 13% and the cost of capital is 8%. What is the most you should be paying for the coffee shop?
Problem 3: You are interested in buying a coffee shop. Your accountant provides you with the projected monthly income from the business for the next 2 years. In month 1 to 3: cash flow is -100, in month 4 to 9 cash flow is + 400, in month 10 to 16 cash flow is + 900 and in month 17 to 24 cash flow is + 1100. You have decided that your required rate of return on the coffee shop is 13% and the cost of capital is 8%. What is the most you should be paying for the coffee shop?
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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Transcribed Image Text:Problem 3:
You are interested in buying a coffee shop. Your accountant provides you with the projected monthly income from
the business for the next 2 years. In month 1 to 3: cash flow is -100, in month 4 to 9 cash flow is + 400, in month 10
to 16 cash flow is + 900 and in month 17 to 24 cash flow is + 1100. You have decided that your required rate of
return on the coffee shop is 13% and the cost of capital is 8%. What is the most you should be paying for the coffee
shop?
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