WS: ars -6 7 8 9 10 Amount $ 92,000 82,000 72,000 62,000 52,000 rchased the
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![Helga is considering the purchase of a small restaurant. The purchase price listed by the seller is $920,000. Helga 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
1-6
7
8
9
10
Amount
$ 92,000
82,000
72,000
62,000
52,000
If purchased, the restaurant would be held for 10 years and then sold for an estimated $820,000.
Required:
Determine the present value, assuming that Helga desires a 10 % rate of return on this investment. (Assume that all cash flows occur at
the end of the year.)
Note: Do not round intermediate calculations. Round your final answers to nearest whole dollar amount. Use tables, Excel, or a
financial calculator. (FV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1)
Future Amount
$
92,000
10%
82,000
10%
72,000
10%
62,000
10%
52,000
10%
820,000 10%
n= Present Value
Should the restaurant be purchased?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc8f05c49-8089-4092-b265-7f390ec44542%2Febdbe331-a112-4d6f-91fa-99b6c44a89f7%2Fflhj8t_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Helga is considering the purchase of a small restaurant. The purchase price listed by the seller is $920,000. Helga 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
1-6
7
8
9
10
Amount
$ 92,000
82,000
72,000
62,000
52,000
If purchased, the restaurant would be held for 10 years and then sold for an estimated $820,000.
Required:
Determine the present value, assuming that Helga desires a 10 % rate of return on this investment. (Assume that all cash flows occur at
the end of the year.)
Note: Do not round intermediate calculations. Round your final answers to nearest whole dollar amount. Use tables, Excel, or a
financial calculator. (FV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1)
Future Amount
$
92,000
10%
82,000
10%
72,000
10%
62,000
10%
52,000
10%
820,000 10%
n= Present Value
Should the restaurant be purchased?
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