Question
George is interested in buying one of the two local businesses on sale: a Coffee Shop or a Shoe Store. The cashflows of both the
George is interested in buying one of the two local businesses on sale: a Coffee Shop or a Shoe Store. The cashflows of both the businesses are shown below. George can borrow from a bank at a rate of 8.00% to buy Coffee Shop and 6.00% to buy Shoe Store
| Coffee Shop | Shoe Store | Year |
| -$115,000 | -$115,000 | 0 (Purchase Price) |
| $7,188 | $51,750 | 1 |
| $21,562 | $38,812 | 2 |
| $40,250 | $28,750 | 3 |
| $50,315 | $21,563 | 4 |
| $57,500 | $14,375 | 5 |
If George buys the Coffee Shop instead of Shoe Store, How much extra NPV will he get? Enter your answer in the following format: + or - 1,234; Hint1: Answer is between -1,882 and -2,283 Hint2: Compute NPV(Coffee Shop) - NPV (Shoe Store).
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Finance For Housing An Introduction
Authors: Cathy Davis
1st Edition
1447306481, 978-1447306481
