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Mert, a recent graduate and intern, has joined Granny's Home Appliances to identify and analyze investment opportunities in the kitchen appliance industry. Mert's role involves
Mert, a recent graduate and intern, has joined Granny's Home Appliances to identify and analyze investment opportunities in the kitchen appliance industry. Mert's role involves researching potential partnerships and investments to help Granny's Home Appliances expand its business. Help Mert with his research. Mert and his team are negotiating with RifleLock, which is a startup that produces smart locks. They're planning to make an initial investment of 1700000 to purchase new equipment for smart lock production. They expect to generate yearly revenue of 195,000 while incurring annual costs of 135,000 . Their plan is to sell the company for 6,500,000 in the sixth year. Please refer to tables A1, B1 and B2 as necessary. Keep in mind that the expected rate of return is 25%.A)What is the cashflow in year 6?B)Report the amount of money that exceeded Granny's Home Appliances' expectations in terms of today.C)What is the internal rate of return of this business?D)What would be the IRR if the annual revenue were increased by 36% ? (Do not forget to change the annual revenue back to its original value.)Table A-1
2= "Initial Investment
" 1,700,000.00
"Annual Revenue " 195,000.00
Annual Costs 135,000.00
Selling Price 6,500,000.00
"Expected Rate of Return " 25.00%
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