18Bruce is considering the purchase of a restaurant named Hard Rock Hollywood. With the help of his accountant, Bruce projects the netcash flows (cash inflows less cash outflows) from the restaurant to be the following amounts over the next 10 years:Years1 to 678910Amount$80,000 (each year)90,000100,000110,000120,000Bruce expects to sell the restaurant after 10 years for an estimated $1,100,000. (EV of $1. PV of $1. FVA of $1. and PVA of $1) (Usetables, Excel, or a financial calculator. Round your answer to 2 decimal places.)Required:1-a. Calculate the total present value of the net cash flows if Bruce wants to make at least 10% annually on his investment. (Assume allcash flows occur at the end of each year. Be sure to include the selling price in your calculation.)1-b. Assuming the restaurant is listed for sale at $1,050,000, should he purchase the restaurant?Complete this question by entering your answers in the tabs below.Reg 1AReq 18Calculate the total present value of the net cash flows if Bruce wants to make at least 10% annually on his investment.(Assume all cash flows occur at the end of each year. Be sure to include the selling price in your calculation.)Total present valueTAReq 18

Present Value is the current price of future value which will be received in near future at some…

Answered: Bruce is considering the purchase of a…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 4P

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Bruce is considering the purchase of a restaurant named Hard Rock Hollywood. The restaurant is listed for sale at $1,030,000. With the help of his accountant, Bruce projects the net cash flows (cash inflows less cash outflows) from the restaurant to be the following amounts over the next 10 years: Years Amount 1-6 $ 83,000 (each year) 7 93,000 8 103,000 9 113,000 10 123,000 Bruce expects to sell the restaurant after 10 years for an estimated $1,130,000. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Round your answer to 2 decimal places.)Required:1-a. Calculate the total present value of the net cash flows if Bruce wants to make at least 10% annually on his investment. (Assume all cash flows occur at the end of each year.) 1-b. Should he purchase the restaurant?
Bruce is considering the purchase of a restaurant named Hard Rock Hollywood. The restaurant is listed for sale at $1,000,000. With the help of his accountant, Bruce projects the net cash flows (cash inflows less cash outflows) from the restaurant to be the following amounts over the next 10 years:Years Amount 1–6 $100,000 (each year) 7 110,000 8 120,000 9 130,000 10 140,000Bruce expects to sell the restaurant after 10 years for an estimated $1,300,000. Required: If Bruce wants to make at least 11% annually on his investment, should he purchase the restaurant? (Assume all cash flows occur at the end of each year.)
Mr. John Backster, a retired executive, desires to invest a portion of his assets in rental property. He has narrowed his choices to two apartment complexes, Windy Acres and Hillcrest Apartments. The anticipated annual cash inflows from each are as follows: Windy Acres Yearly Aftertax Cash Inflow Probability $50,000 0.2 55,000 70,000 85,000 90,000 0.2 0.2 0.2 0.2 Hillcrest Apartments Yearly Aftertax Cash Inflow Probability $55,000 0.4 60,000 0.2 70,000 0.1 80,000 0.3 a. Find the expected value of the cash flow for each apartment complex. (Enter the answers in thousands.) Expected cash flow Windy Acres Hillcrest Apartments $ $ b. What is the coefficient of variation for each apartment complex? (Do not round intermediate calculations. Round the final answers to 4 decimal places.) Windy Acres Hillcrest Apartments Coefficient of variation c. Which apartment complex has more risk? O Hillcrest Apartments
I. A house owner decided to renovate his property in 7 years where he will be paying 50,000 for the renovation. To prepare for this amount, he set four equal annual payments now. No further payments are made after 4 years. If money is worth 12% per annum, what annual payment is necessary? Show Cash Flow Diagram II. As a member, Mr. Dela Cruz will deposit P300 with a savings and loan organization at the beginning of each 3 months for 12 years. If the organization pays interest at the rate of 1.4.% per 3 months. Find the sum to his credit just after the last deposit. Show Cash Flow Diagram
Mr. John Backster, a retired executive, desires to invest a portion of his assets in rental property. He has narrowed his choices to two apartment complexes, Windy Acres and Hillcrest Apartments. The anticipated annual cash inflows from each are as follows: Windy Acres Yearly Aftertax Cash Inflow 10,000 Probability 0.1 15,000 30,000 45,000 50,000 0.2 0.4 0.2 0.1 Hillcrest Apartments Yearly Aftertax Cash Inflow Probability 15,000 20,000 30,000 60,000 0.2 0.3 0.4 0.1 Mr. Backster is likely to hold the apartment complex of his choice for about 25 years and will use this period for decision-making purposes. Either apartment can be purchased for $200,000, Mr. Backster uses a risk adjusted discount rate approach when evaluating investments. His scale is related to the coefficient of variation (for other types of investments, he also considers other measures). Coefficient of Variation 0-0.35 0.35-0.40 0.40-0.58 Over 8.58 Discount Rate 5% 9 13 not considered (cost of capital) a. Compute the…
One year ago the Jenkins Family Fun Center deposited $5000 in an investment account for the purpose of buying new equipment four years from today. Today, they ae adding another $$6800 to this account. They plan on making a final deposit of $9000 to the account next year. Hoow wmuch will be available when they are ready to buy the equipment, assuming they earn 8-percent rate of return
One year ago, the Jenkins Family Fun Center deposited $3,400 into an investment account for the purpose of buying new equipment four years from today. Today, they are adding another $5,200 to this account. They plan on making a final deposit of $7,400 to the account next year. How much will be available when they are ready to buy the equipment, assuming they earn a rate of return of 6 percent? Multiple Choice $19,019.26 $19,928.37 $17,421.48 $19,431.85 $18.516.29
Ted Houser wishes to accumulate a fund of $40,000 for the purchase of a house and lot. He plans to deposit $4,000 semiannually at the end of each 6 months. Assuming interest at 14% a year compounded semiannually, how many deposits of $4,000 each will be required, and what is the amount of the last deposit?
Daryl Kearns saved $270,000 during the 25 years that he worked for a major corporation. Now he has retired at the age of 50 and has begun to draw a comfortable pension check every month. He wants to ensure the financial security of his retirement by investing his savings wisely and is currently considering two investment opportunities. Both investments require an initial payment of $190.500 The following table presents the estimated cash inflows for the two alternatives: Opportunity #1 Opportunity #2 Year 1 $ 55,650 104,100 Year 2 $58,890 109,450 Year 3 $78,840 17,100 Mr. Kearns decides to use his past average return on mutual fund investments as the discount rate; it is 10 percent. PV of $1 and PXA of 5) (Use appropriate factor(s) from the tables provided.) Required a. Compute the net present value of each opportunity. Which should Mr. Keams adopt based on the net present value approach? b. Compute the payback period for each opportunity. Which should Mr. Kearns adopt based on the…
Kindly answer the problem with complete solution so that I can understand. Write in handwritten clean and clear A house and lot can be acquired at a down payment of P120,000 and a payment of P12000 at the end of each year for a period of 10 years. If money is worth 14% compounded monthly, what is the cash price of the property?
The pipe guy plans to deposit $78,000 into an investment each year for the next 10 years so he can fund a new brick and mortar pie shop in downtown Flagstaff the investment pays 6% annual interest how much money will the pike I have at the end of 10 years? what are you trying to find in the above problem? a. The future value of a single amount. b. The future value of an annuity c. The present value of an annuity d. The present value of a single amount.
A business man must fund an account for him to pay the maintenance of the building after it shut down in 10 years. The costs until the business shutdown is part of the operating cost of the business while the maintenance costs starts in 10 years at 23,000 annually. Draw the cash flow diagram and solve on how much money should be deposited if the fund earns an interest of 12 percent?

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