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Please do the question manually and show all of your work! The correct answer is not helpful without the steps. Please and many thanks! Question
Please do the question manually and show all of your work! The correct answer is not helpful without the steps. Please and many thanks!
Question 5 10 points Your best friend is opening a vintage clothing store and wants you to invest. For only $35,000 today, she will offer you a perpetual stream of cash flows representing a dividend from the potential profits. Those cash flows to you will vary for the first three years; and thereafter will grow at 1.5% annually and in perpetuity. (Just for clarification, this means that, based on the estimated Year 3 cash dividend of $12,000, the Year 4 cash flow to you will be $12,180 and the Year 5 cash flow will be $12,363.) This small chart represents the first three years of the proposal: 0 Year Cash Flow (35,000 1 2,000 2 10,000 3 12,000 You are intrigued, but worried: failure in the retail industry is rampant. You decide that you will assign it a risk-adjusted discount rate of 30%. What is the Net Present Value of all of your expected cash flows, including the (negative) up-front investment outflow and the perpetuity at the end of your forecast? O A. OOOO ($14,888) ($ 2,917) ($ 2,805) ($ 2,630) $ 13,543Step by Step Solution
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