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Dan is thinking of buying an auto repair shop; the purchase price is $100,000. The current owner tells Dan that he can expect the following
Dan is thinking of buying an auto repair shop; the purchase price is $100,000. The current owner tells Dan that he can expect the following annual profits after expenses at the end of each year for the next 5 years: Yr 1 = $5,000; Yr 2 = $6,000; Yr 3 = $6,000; Yr 4 = $7,500; and Yr 5 = $9,000. At the end of Year 5, Dan thinks he could sell the shop for what he paid for it. If Dan wants to earn 6.5% on this investment, what is the NPV of the investment? Should he purchase the shop?
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