You are interested buying a business and the current owner is asking $180,000 for it. You require a 20 percent return on your investment. Answer the questions below using the following forecasted cash flows. Year EBITDA Net Cash Flow 16,000 4,170 2 16,500 4,432 17,000 4,688 4 17,500 4,936 1. 3.

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
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please answer within 30 minutes.
You are interested buying a business and the
current owner is asking $180,000 for it. You require
a 20 percent return on your investment. Answer the
questions below using the following forecasted cash
flows.
Year
EBITDA
Net
Cash
Flow
1
16,000
4,170
2
16,500
4,432
17,000
4,688
4
17,500
4,936
18,500
5,526
19,500
6,107
7
20,500
6,678
21,500
7,239
9.
22,500
7,789
10
23,500
8,327
What is the maximum interest rate you can afford if
you want to borrow $100,000 with a 15-year term and
can only afford payments of $10,000 a year? What will
be a reasonable term for 8 percent interest rate?
N
I/Y
PV
PMT
FV
3.
Transcribed Image Text:You are interested buying a business and the current owner is asking $180,000 for it. You require a 20 percent return on your investment. Answer the questions below using the following forecasted cash flows. Year EBITDA Net Cash Flow 1 16,000 4,170 2 16,500 4,432 17,000 4,688 4 17,500 4,936 18,500 5,526 19,500 6,107 7 20,500 6,678 21,500 7,239 9. 22,500 7,789 10 23,500 8,327 What is the maximum interest rate you can afford if you want to borrow $100,000 with a 15-year term and can only afford payments of $10,000 a year? What will be a reasonable term for 8 percent interest rate? N I/Y PV PMT FV 3.
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