Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

**** PLEASE DISPLAY THIS QUESTION ON EXCEL. Question : Calculate the monthly net cash flows. Assume that Jack can reinvest all profit at a rate

**** PLEASE DISPLAY THIS QUESTION ON EXCEL.

Question: Calculate the monthly net cash flows. Assume that Jack can reinvest all profit at a rate of x% p.a. Use Goal Seek to find this reinvestment rate if Jack requires a holding period yield rate of 7.5% p.a. for this investment (from 1 January 2021 to 1 January 2024).

Information: Today is 1 January 2021. Jake used $200,000 to purchase a cafe business in Sydney. To operate this business, Jake needs to pay rent, maintenance costs and labour costs. Here are the details:

Rent will be paid by the end of each month with an amount of $2,000.

Labour cost will be paid by the end of each month with an amount of $10,000.

Maintenance cost will be paid by the end of each quarter with an amount of $500.

Jake predicts that this cafe franchise initially can have monthly revenue of $13,000.

Assume that Jake can obtain this amount by the end of each month. Jake forecasts that this revenue amount will increase at the rate of 0.8% p.a. The revenue increase will only happen at the beginning of each year. For example, this cafe franchise initially has monthly revenue of $13,000 in 2021. Then the revenue amount will become $13,000(1+0.8%) per month in 2022 and $13, 000(1 + 0.8%)2 per month in 2023. Predict that he can sell this business on 1 January 2024 with an amount of $210,000.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Alaskas Permanent Fund Dividend Examining Its Suitability As A Model

Authors: K. Widerquist, M. Howard

2nd Edition

0230112072, 9780230112070

More Books

Students also viewed these Accounting questions

Question

What is self-awareness? (p. 44)

Answered: 1 week ago

Question

Explain the factors influencing wage and salary administration.

Answered: 1 week ago

Question

Examine various types of executive compensation plans.

Answered: 1 week ago

Question

1. What is the meaning and definition of banks ?

Answered: 1 week ago