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 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?