You are considering purchasing a business that

sells sports memorabilia and think you can buy the

business from the owner for $120.000. You can

expect revenues of $40,000/year. You estimate

your expenses will be $20,000/year for the first 2

years and $10,000/year for the last 3 years. At the

end of 5 years u eant to sell the business and

hopefully retire. You believe you can sell it for

130,000. You want to earn at least a 16% per year

on your

investment.

a. calculate the payback for this project

b. calculate the NPV. Should you buy the

business? explain why or why not

c. how high could the purchase price be and still

make it worthwhile to buy the business?

d. you may have overestimated how much you

could sell the business in 5 years. What is the

lowest selling price you can accept and still make

it worthwhile to buy the business?

e. what rate of return will you earn? should you

invest ? explain why or why not

f. your estimates of your projected annual revenue

may be too high. what is the maximum annual

decrease in revenue you could withstand and still

be willing to buy the business?