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Two young entrepreneurs want to invest $150,000 in a restaurant. Their business plan shows that the restaurant will generate the following cash flows: Year Cashflow
Two young entrepreneurs want to invest | $150,000 | in a restaurant. | |||||
Their business plan shows that the restaurant will generate the following cash flows: | |||||||
Year | Cashflow | ||||||
1 | $ 15,000 | ||||||
2 | $ 15,000 | ||||||
3 | $ 25,000 | ||||||
4 | $ 25,000 | ||||||
5 | $ 25,000 | ||||||
6 | $ 40,000 | ||||||
7 | $ 40,000 | ||||||
8 | $ 40,000 | ||||||
9 | $ 45,000 | ||||||
10 | $ 50,000 | ||||||
They want to earn at least | 11% | return | |||||
They also would like to have their initial investment recovered within | 7 | years | |||||
Q1 | What is the present value? | ||||||
Q2 | What is the net present value? | ||||||
Q3 | What is the payback period? | ||||||
Q4 | Should these entrepreneurs proceed with this investment? | ||||||
Use Interest Rate Table to solve for asnwering Q1 |
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