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Problem - Time Value of Money Hazal reached an agreement to purchase a store in Kadikoy. Hazal pays $3.8 million now for the store and
Problem - Time Value of Money Hazal reached an agreement to purchase a store in Kadikoy. Hazal pays $3.8 million now for the store and intends to operate the shop as a patisserie for 4 years before selling it for $4.8 million. (To answer part a and part b, ignore the shop's profits and losses) a. Given an interest rate of 7% calculate the present value of the sales price of the store at the end of 4 years? (Intermediate computations should not be rounded. Fill in the blanks with your answer in millions, rounded to three decimal places.) b. Should Hazal buy the store? c-1. What is the present value of future cash flows if Hazal could also profit $280,000 per year from the patisserie? Assume that the annun profits are collected at the year-end until the end of 4 years. (Intermediate computations should not be rounded. Fill in the blanks with your answer in millions, rounded to three decimal places) c-2. Should Hazal buy the store if she receives the annual profits stated in o-1? million b. 0-1. present value of the sales price Should Hazal consider purchasing the store? present value of future cash flows with patisserie income Should Hazal consider buying the patisserie now? million 0-2
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