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Two young entrepreneurs want to invest $2,50,000 in a restaurant. Their business plan shows that the restaurant will generate the following cash flows: Year Cashflow
Two young entrepreneurs want to invest | $2,50,000 | in a restaurant. | |||||||
Their business plan shows that the restaurant will generate the following cash flows: | |||||||||
Year | Cashflow | ||||||||
1 | $ 10,000 | ||||||||
2 | $ 30,000 | ||||||||
3 | $ 40,000 | ||||||||
4 | $ 50,000 | ||||||||
5 | $ 50,000 | ||||||||
6 | $ 60,000 | ||||||||
7 | $ 60,000 | ||||||||
8 | $ 75,000 | ||||||||
9 | $ 75,000 | ||||||||
10 | $ 75,000 | ||||||||
They want to earn at least | 16% | return | |||||||
They also would like to have their initial investment recovered within | 5 | years | |||||||
Based on the information above, calculate the following: | |||||||||
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 the Interest Rate Table to solve for answer Q1 | |||||||||
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