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Helga is considering the purchase of a small restaurant. The purchase price listed by the seller is $850,000. Helga has used past financial information
Helga is considering the purchase of a small restaurant. The purchase price listed by the seller is $850,000. 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 $ 85,000 7 8 9 10 75,000 65,000 55,000 45,000 If purchased, the restaurant would be held for 10 years and then sold for an estimated $750,000. 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. PVA of $1. EVAD of $1 and PVAD of $1) Future Amount TM Present Value $ 85,000 10% 75,000 10% 65,000 10% 55,000 10% 45,000 10% 750,000 10% $ 0 Should the restaurant be purchased?
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