Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Calculate by hand. The owner of the Free Chatting Internet Caf invested $160,000 in the purchase and refurbishment of a small shop. At the end
Calculate by hand.
The owner of the Free Chatting Internet Caf invested $160,000 in the purchase and refurbishment of a small shop. At the end of the first year, he spent $120,000 on the purchase of 10 PCs. The business did very well, earning $70,000 at the end of year 2, $85,000 at the end of year 3, and $100,000 at the end of year 4. Given this situation, the owner made an additional investment of $130,000 at the end of year 5 for an expansion of the facilities. However, profits were no longer as expected and net income was only $40,000 in each of years 6 through 11, at which point he went out of business and sold all the PCs for scrap for $20,000. With an annual MARR of 7% (15 points) a) Determine through the NPV if the business was convenient during the 11 years. b) Determine the annual rate of return he earned during each of the 11 years. Calculate the IRR through excel, make a graph showing the IRR and the ranges where NPV are positive and negativeStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started