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4. After slaving for others, you nally decided to go to Rio and open a small bistro so you can enjoy the free time and
4. After slaving for others, you nally decided to go to Rio and open a small bistro so you can enjoy the free time and partake in the festivities of the Carnaval do Brasil. You nd an excellentg location and the owner of an old bistro is willing to sell his store for $120,000. He givesyou a nice cup of expresso and while talkingh he gives out the details of his operation: You put them in the right order as follows: Cash $18,000 Bank loans $6,000 Receivables 6,000 Payables 12,000 inventories 39,000 Accruals 3,000 Net xed assets 42,000 Net worth 84,000 Total Liabilities Total assets 105 000 Net worth 105,000 Annual pretax earnings (after rent, interest, and salaries) have averaged $24,000 For the preceding three years. The store has been in this location for a long time and has a six years remaining on 10year lease. The purchase price includes all assets except cash. The liabilities have to be assumed by you, the buyer. a. Would you pay the asking price or is $120,000 a reasonable offer? b. What other factors should you consider in arriving at the purchase price? c. What is the signicance of the lease, if any
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