Use the information below to answer the following question(s): The owner of the Krusty Krab is considering selling his restaurant and retiring. An investor has offered to buy the Krusty Krab for $350,000 whenever the owner is ready for retirement. The owner is considering the following three alternatives: 1. Sell the restaurant now and retire. Hire someone to manage the restaurant for the next year and retire. This will require the owner to spend $50,000 now, but will generate 2. $100,000 in profit next year. In one year the owner will sell the restaurant for $350,000. Scale back the restaurant's hours and ease into retirement over the next year. This will require the owner to spend $40,000 on expenses 3. now, but will generate $75,000 in profit at the end of the year. In one year the owner will sell the restaurant for $350,000. If the discount rate is 15%, the alternative with the lowest NPV is: O #1 with an NPV of approximately $350,000. O #2 with an NPV of approximately $341,300. O #3 with an NPV of approximately $329,570. O #2 with an NPV of approximately $400,000. O None of these

Use the information below to answer the following question(s): The owner of the Krusty Krab is considering selling his restaurant and retiring. An investor has offered to buy the Krusty Krab for $350,000 whenever the owner is ready for retirement. The owner is considering the following three alternatives: 1. Sell the restaurant now and retire. Hire someone to manage the restaurant for the next year and retire. This will require the owner to spend $50,000 now, but will generate 2. $100,000 in profit next year. In one year the owner will sell the restaurant for $350,000. Scale back the restaurant's hours and ease into retirement over the next year. This will require the owner to spend $40,000 on expenses 3. now, but will generate $75,000 in profit at the end of the year. In one year the owner will sell the restaurant for $350,000. If the discount rate is 15%, the alternative with the lowest NPV is: O #1 with an NPV of approximately $350,000. O #2 with an NPV of approximately $341,300. O #3 with an NPV of approximately $329,570. O #2 with an NPV of approximately $400,000. O None of these

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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r. Grayson is considering giving up his paid employment and going into business on his own account. He is considering buying a quarry pit with a “life” of about 35 years. To purchase this business, he would have to pay sh 4,750,000 now. Mr. Grayson wishes to retire in 20 years’ time. He predicts that the net cash operating receipts from this business will be sh 1,250,000 per annum for the first 15 years and sh 1,000,000 per annum for the last 5 years. He thinks that the business could be sold at the end of the 20 year period for sh 1,500,000. Additionally, he estimates that certain capital replacements and improvements would be necessary and this should amount to sh 1000,000 per annum for the first 5 years; sh 150,000 per annum for the next 5 years, sh 200,000 per annum for the next 7 years and nothing for the last three years. This expenditure would be incurred at the start. Mr. Grayson has excluded any compensation to himself from the above data. If he should purchase the business,…
Rebecca is moving away from New York City for her new job, so she must buy a car rather than rely on public transit. The new car she is considering will cost $ 18,000 to buy, $ 1,500 per year to insure, and $ 500 per year for maintenance after the 3-year warranty expires. She would keep the car for 7 years when it will have a salvage value of $ 7,000. She has found a 2-year-old car that is the same model for $ 13,000. The 3-year warranty is transferrable, so the annual maintenance cost of $500 starts in year 2. Because the car is less valuable, insurance is $300 per year less than for the new car. After 5 years, the vehicle will be 7 years old and will have the same salvage value of $ 7,000.Rebecca is ignoring costs for fuel, oil, tires and registration, because the two vehicles will have the same costs. If her interest rate is 9%, how much cheaper is the used car (difference of EAC of two vehicles)
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You are the owner of a small bar, The World, and you are considering opening a bakery in a vacant area in the back of the store. You estimate that it will cost you $52,175.00 to set up the bakery and that you will generate $10,758.00 in after-tax cash flows in for the life of the store (which is expected to be 10 years.) The one concern you have is that you have limited parking; by opening the bakery you run the risk of not having enough parking for customers who enjoy your bar. You estimate that the lost sales would amount to $3,230.00 per year and that your after-tax operating margin on sales at the bar is 54.00%. If your discount rate is 14.00%, what is the NPV of opening the bakery?
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In the aftermath of the mortgage crisis, The Johnson family from Old Bight, Cat Island, are considering remodelling their home. They originally wanted to sell their home and move to another area, but news from the Old Bight Sentinal continues to show a decline in real estate values. Their plan now is to improve their home's curb appeal as well as update the interior. They estimate the cost will be $30,000.00. How much must they invest today at 8% interest compounded quarterly in order to have the money they need to remodel in 6 years? 9.
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Could you please solve these questions?
Your landlord is planning to renovate the pool in your apartment. The New pool will cost 152,895 dollars, which will add money to you rent but will increase the revenue for your landlord by 54,500 at year 4 and 87325 at years 10. He calculates that the operational cost will be 13250. The poll has a salvage value of 68,560 after 8 years. a) At a discount rate of 12.45% find the present value of this plan b) draw a cash flow diagram and show if your land lord's plan is viable or not
Please Show me the calculations!! A real estate investor is considering the purchase of an apartment building that currently provides income of $30,000 and is expected to grow in income by 3% for the next 4 years. You would receive income from today, year 0, through year 4. At the end of year 4, they expect to sell the property for $800,000. The investor has a discount rateof 6%. How much should an investor be willing to pay for this property?

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