Question
PLEASE FILL IN ALL BLANKS PLEASE John and Sally Claussen are contemplating the purchase of a hardware store from John Duggan. The Claussens anticipate that
PLEASE FILL IN ALL BLANKS PLEASE John and Sally Claussen are contemplating the purchase of a hardware store from John Duggan. The Claussens anticipate that the store will generate cash flows of $89,000 per year for 20 years. At the end of 20 years, they intend to sell the store for an estimated $590,000. The Claussens will finance the investment with a variable rate mortgage. Interest rates will increase twice during the 20-year life of the mortgage. Accordingly, the Claussens desired rate of return on this investment varies as follows: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) |
Years 15 | 8 | % | |
Years 610 | 10 | % | |
Years 1120 | 12 | % | |
Required: | |||||||||||||||||||||||||||||||||||||||
What is the maximum amount the Claussens should pay John Duggan for the hardware store? (Assume that all cash flows occur at the end of the year.) | |||||||||||||||||||||||||||||||||||||||
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