The required table is as below:
PV of $ 71,000 | PV of $ 410,000 | Maximum Price | |
Year 1-5 | $ 283,482.41 | ||
Year 6-10 | $ 179,488.46 | ||
Year 11-20 | $ 147,260.82 | ||
Year 20 | $ 50,853.90 | ||
$ 610,231.69 | $ 50,853.90 | $ 661,086 |
Working Notes:
Year | CF | Rate | PV Factor | Present Value |
1 | $ 71,000.00 | 8.00% | 0.9259 | $ 65,740.74 |
2 | $ 71,000.00 | 8.00% | 0.8573 | $ 60,871.06 |
3 | $ 71,000.00 | 8.00% | 0.7938 | $ 56,362.09 |
4 | $ 71,000.00 | 8.00% | 0.7350 | $ 52,187.12 |
5 | $ 71,000.00 | 8.00% | 0.6806 | $ 48,321.41 |
$ 283,482.41 | ||||
6 | $ 71,000.00 | 9.00% | 0.5963 | $ 42,334.98 |
7 | $ 71,000.00 | 9.00% | 0.5470 | $ 38,839.43 |
8 | $ 71,000.00 | 9.00% | 0.5019 | $ 35,632.51 |
9 | $ 71,000.00 | 9.00% | 0.4604 | $ 32,690.37 |
10 | $ 71,000.00 | 9.00% | 0.4224 | $ 29,991.17 |
$ 179,488.46 | ||||
11 | $ 71,000.00 | 11.00% | 0.3173 | $ 22,527.12 |
12 | $ 71,000.00 | 11.00% | 0.2858 | $ 20,294.70 |
13 | $ 71,000.00 | 11.00% | 0.2575 | $ 18,283.51 |
14 | $ 71,000.00 | 11.00% | 0.2320 | $ 16,471.63 |
15 | $ 71,000.00 | 11.00% | 0.2090 | $ 14,839.31 |
16 | $ 71,000.00 | 11.00% | 0.1883 | $ 13,368.75 |
17 | $ 71,000.00 | 11.00% | 0.1696 | $ 12,043.92 |
18 | $ 71,000.00 | 11.00% | 0.1528 | $ 10,850.37 |
19 | $ 71,000.00 | 11.00% | 0.1377 | $ 9,775.11 |
20 | $ 71,000.00 | 11.00% | 0.1240 | $ 8,806.41 |
$ 147,260.82 | ||||
20 | $ 410,000.00 | 11.00% | 0.1240 | $ 50,853.90 |
John and Sally Claussen are considering the purchase of a hardware store from John Duggan. The...
Retur John and Sally Claussen are considering the purchase of a hardware store from John Duggan. The Claussens anticipate that the store will generate cash flows of $70,000 per year for 20 years. At the end of 20 years, they intend to sell the store for an estimated $400,000. The Claussens will finance the investment with a variable rate mortgage. Interest rates will increase twice during the 20 year life of the mortgage. Accordingly, the Claussens' desired rate of return...
VIEW THE STEP-BY-STEP SOLUTION TO: Question John and Sally Claussen are considering the purchase of a hardware store from John Duggan. The Claussens anticipate that the store will generate cash flows of $70,000 per year for 20 years. At the end of 20 years, they intend to sell the store for an estimated $400,000. The Claussens will finance the investment with a variable rate mortgage. Interest rates will increase twice during the 20-year life of the mortgage. Accordingly, the Claussens'...
John Wiggins is considering the purchase of a small restaurant. The purchase price listed by the seller is $890,000. John has used past financial information to estimate that the net cash flows (cash inflows less cash outflows) generated by the restaurant would be as follows: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Years 1-6 Amount $ 89,000 79,000 69,000 59,000 49,000...
John Wiggins is considering the purchase of a small restaurant. The purchase price listed by the seller is $890,000. John has used past financial information to estimate that the net cash flows (cash inflows less cash outflows) generated by the restaurant would be as follows: (FV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Years 1-6 7 Amount $89.000 79,00 69,000 59,000 49.000...
John Wiggins is considering the purchase of a small restaurant. The purchase price listed by the seller is $920,000. John has used past financial information to estimate that the net cash flows (cash inflows less cash outflows) generated by the restaurant would be as follows: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Years Amount 1-6 $ 92,000 7 82,000 8 72,000...
John Wiggins is considering the purchase of a small restaurant. The purchase price listed by the seller is $820,000. John has used past financial information to estimate that the net cash flows (cash inflows less cash outflows) generated by the restaurant would be as follows: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Years 1-6 7 8 Amount $82,000 72,000 62,000 52,000...
John Wiggins is considering the purchase of a small restaurant. The purchase price listed by the seller is $920,000. John has used past financial information to estimate that the net cash flows (cash inflows less cash outflows) generated by the restaurant would be as follows: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Years Amount 1-6 $ 92,000 7 82,000 8 72,000...
John Wiggins is considering the purchase of a small restaurant. The purchase price listed by the seller is $960,000. John has used past financial information to estimate that the net cash flows (cash inflows less cash outflows) generated by the restaurant would be as follows: (FV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Years 1-6 7 8 9 10 Amount $96,000 86,000...
Check my work View previa John Wiggins is considering the purchase of a small restaurant. The purchase price listed by the seller is $920,000. John has used past financial information to estimate that the net cash flows (cash inflows less cash outflows) generated by the restaurant would be as follows: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Years 1-6 7 8...
John and Sally Claussen are considering the purchase of a hardware store from John Duggan. The Claussens anticipate that the store will generate cash flows of $73,000 per year for 20 years. At the end of 20 years, they intend to sell the store for an estimated $430,000. The Claussens will finance the investment with a variable rate mortgage. Interest rates will increase twice during the 20-year life of the mortgage. Accordingly, the Claussens’ desired rate of return on this...