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A food distribution conglomerate purchased a food store chain for P75 million 3 years ago. A net loss of P10 million at the end
A food distribution conglomerate purchased a food store chain for P75 million 3 years ago. A net loss of P10 million at the end of 1 year ownership was incurred. Net cash flow was increasing at P5 million per year starting at the second year and this pattern is expected to continue. Because of the heavy debt financing used to purchase the food store chain, the board of directors expect a MARR at 25% per year from any sale. a) The conglomerate has been offered P159.5 million by another company Use future worth analysis to determine if the MARR will be realized at the selling price. b) If the conglomerate continue to own the food store chain, what selling price must be obtained at the end of 5 years of ownership to just make the MARR?
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Solution and Explanation a Set up the future worth relation in year 3 FW3 at i 25 per year and a...Get Instant Access to Expert-Tailored Solutions
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