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Helga is considering the purchase of a small restaurant. The purchase price listed by the seller is $880,000. Helga has used past financial information
Helga is considering the purchase of a small restaurant. The purchase price listed by the seller is $880,000. 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 $ 88,000 7 78,000 8 68,000 9 10 58,000 48,000 If purchased, the restaurant would be held for 10 years and then sold for an estimated $780,000. 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. (EV of $1 PV of $1. EVA of $1. EVA of $1. EVAD of $1 and PVAD of $1) Future Amount Present Value S 88,000 10% 78,000 10% 68,000 10% 58,000 10% 48,000 10% 780,000 10% $ Should the restaurant be purchased?
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