Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Today is 1 January 2 0 2 4 . Ella used $ 2 0 0 , 0 0 0 to purchase a florist business in

image text in transcribed
Today is 1 January 2024. Ella used $200,000 to purchase a florist business in Sydney. To operate this business, Ella needs to pay rent, maintenance costs, and labor costs. Here are the details:
Rent will be paid by the end of each month with an amount of $2,000.
Labor cojit 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.
Ella predicts that this florist franchise initially can have monthly revenue of $13,000. Assume that Ella can obtain this amount by the end of each month. Ella forecasts that this revenue amount will increase at the rate of y% p.a. The revenue increase will only happen at the beginning of each year. For example, this florist franchise initially has monthly revenue of $13,000 in 2024. Then the revenue amount will become $13,000(1+y%) per month in 2025 and $13,000(1+y%)2 per month in 2026.
Ella plans to run this business for three years and predicts that she can sell this business on 1 January 2027 with an amount of $240,000.
a. Calculate the monthly net cash flows. Assume that Ella can reinvest all profit at a rate of 4.5% p.a. Use Goal Seek to find revenue increasing rate y% p.a. if Ella requires a holding period yield rate of 7.5% p.a. for this investment (from 1 January 2024 to 1 January 2027). Label this sheet as "Part a".
image text in transcribed

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

Horngrens Cost Accounting A Managerial Emphasis

Authors: Srikant M. Datar, Madhav V. Rajan

16th edition

134475585, 978-0134475998, 134475992, 978-0134475585

More Books

Students also viewed these Accounting questions

Question

3. I know I will be able to learn the material for this class.

Answered: 1 week ago