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Helga is considering the purchase of a small restaurant. The purchase price listed by the seller is $990,000. Helga has used past financial information
Helga is considering the purchase of a small restaurant. The purchase price listed by the seller is $990,000. Helga has used past financial information to estimate that the net cash flows (cash inflows less cash outflows) generated by the restaurant would be as follows: Years 1-6 Amount $ 99,000 7 8 9 10 89,000 79,000 69,000 59,000 If purchased, the restaurant would be held for 10 years and then sold for an estimated $890,000. Required: Determine the present value, assuming that Helga desires a 10% rate of return on this investment. (Assume that all cash flows occur at the end of the year.) Note: Do not round intermediate calculations. Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) $ Future Amount i= n = Present Value 99,000 10% 6 89,000 10% 7 79,000 10% 8 69,000 10% 9 59,000 10% 10 890,000 10% 10 $ 0
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