Helga is considering the purchase of a small restaurant. The purchase price listed by the seller is $910,000. Helga 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: Years 1-6 Amount $ 91,000 7 8 9 10 81,000 71,000 61,000 51,000 If purchased, the restaurant would be held for 10 years and then sold for an estimated $810,000. Required: Determine the present value, assuming that Helga desires a 10% rate of return on this investment. (Assume that all cash flows occur at the end of the year.) Note: Do not round intermediate calculations. Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. (FV of $1, PV of $1 FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Future Amount n = Present Value $ 91,000 10% 6 81,000 10% 7 71,000 10% 8 61,000 10% 9 51,000 10% 10 810,000 10% 10 Should the restaurant be purchased?

Helga is considering the purchase of a small restaurant. The purchase price listed by the seller is $910,000. Helga 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: Years 1-6 Amount $ 91,000 7 8 9 10 81,000 71,000 61,000 51,000 If purchased, the restaurant would be held for 10 years and then sold for an estimated $810,000. Required: Determine the present value, assuming that Helga desires a 10% rate of return on this investment. (Assume that all cash flows occur at the end of the year.) Note: Do not round intermediate calculations. Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. (FV of $1, PV of $1 FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Future Amount n = Present Value $ 91,000 10% 6 81,000 10% 7 71,000 10% 8 61,000 10% 9 51,000 10% 10 810,000 10% 10 Should the restaurant be purchased?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Helga is considering the purchase of a small restaurant. The purchase price listed by the seller is $890,000. Helga 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: Years 1-6 7 8 9 10 Amount $ 89,000 79,000 69,000 59,000 49,000 If purchased, the restaurant would be held for 10 years and then sold for an estimated $790,000. Required: Determine the present value, assuming that Helga desires an 11% rate of return on this investment. (Assume that all cash flows occur at the end of the year.)
On April 1, 2024, Antonio purchased appliances from the Acme Appliance Company for $2,200. In order to increase sales, Acme allows customers to pay in installments and will defer any payments for six months. Antonio will make 18 equal monthly payments, beginning October 1, 2024. The annual interest rate implicit in this agreement is 24%.
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 9 62,000 10 52,000 If purchased, the restaurant would be held for 10 years and then sold for an estimated $820,000. Required:Determine the present value, assuming that John desires a 10% rate of return on this investment. (Assume that all cash flows occur at the end of the year.) (Do not round intermediate calculations. Round your final answers to nearest whole dollar amount.)
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.)
John Wiggins is considering the purchase of a small restaurant. The purchase price listed by the seller is $800,000. 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: Years Amount 1–6 $ 80,000 7 70,000 8 60,000 9 50,000 10 40,000 If purchased, the restaurant would be held for 10 years and then sold for an estimated $700,000.Required:Assuming that John desires a 10% rate of return on this investment, should the restaurant be purchased? (Assume that all cash flows occur at the end of the year.)
The following questions are based on the series of the following cash flows. You plan to sell the property in year 5. The buyer anticipates buying the property for $2,500,000 and selling the property for $3,000,000. The NOI for each year is noted. Please put your answer in percentage with two decimal places; for instance, put 7.63 for 7.63%. Please put dollar amounts with two decimal places as well. Please enter a positive value. All questions should be completed in excel. Rounding will result in an incorrect answer. NOI Property Transactions Year O (2,500,000) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 200,000 212,000 224,720 238,203 252,495 267,645 Your equity partner wants to know how a change in the exit cap rate will affect the IRR of the property when you sell in year 5. What is the IRR with exit cap rates at 10%?
John Wiggins is contemplating the purchase of a small restaurant. The purchase price listed by the seller is $800,000. 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: Required: Assuming that John desires a 10% rate of return on this investment, should the restaurant be purchased? (Assume that all cash flows occur at the end of the year.)
A business is considering purchasing a piece of new equipment for $200,000. The equipment will generate the following revenues: Year 1: $50,000 Year 2: $50,000 Year 3: $50,000 Year 4: $60,000 The machine can be sold at the end of the year four for $25,000. Assume a discount of 8%. Based on your above calculations, should they purchase the new piece of equipment? Why? 2. Carl and Melissa have monthly income of $6000. They want to buy a house for $200,000 and make a down payment of $40,000. The monthly payment on a 15-year mortgage will be $2,000 and a 30- year mortgage, the monthly payment will be $1,350. Which of the following would you recommend? Why? A. 15 year option B. 30 year option C. They cannot afford to buy a house at this point
You have entered into an agreement for the purchase of land. The agreement specifies that you will take ownership of the land immediately. You have agreed to pay $50,000 today and another $50,000 in three years. Calculate the total cost of the land today, assuming a discount rate of (a) 5%, (b) 7 %, or (c) 9%. Note: Use tables, Excel, or a financial calculator. Round your answers to 2 decimal places. (FV of $1, PV of $1, FVA of $1, and PVA of $1) a. b. C. Payment Amount $ 50,000 50,000 50,000 Interest Rate 7 5% 7% 9% Answer is complete but not entirely correct. Compounding Annually Annually Annually Period Due 3 years 3 years 3 years $ Total Cost of Land Today 93,121.25 X 90,816.30✔ 88,617.30
Mr. Sam Golff desires to invest a portion of his assets in rental property. He has narrowed his choices down to two apartment complexes, Palmer Heights and Crenshaw Village. After conferring with the present owners, Mr. Golff has developed the following estimates of the cash flows for these properties. Palmer Heights Yearly AftertaxCash Inflow(in thousands) Probability $60 0.1 65 0.2 80 0.4 95 0.2 100 0.1 Crenshaw Village Yearly AftertaxCash Inflow(in thousands) Probability $65 0.2 70 0.3 80 0.4 90 0.1 a. Find the expected cash flow from each apartment complex. (Enter your answers in thousands (e.g, $10,000 should be enter as "10").) b. What is the coefficient of variation for each apartment complex? (Do not round intermediate calculations. Round your answers to 3 decimal places.) c. Which apartment complex has more…
Mrs. Dionne Jackson desires to invest a portion of her assets in rental property. She has narrowed her choices down to two apartment complexes, Palmer Heights and Crenshaw Village. After conferring with the present owners, Mrs. Jackson has developed the following estimates of the cash flows for these properties. Palmer Heights Yearly Aftertax Cash Inflow (in thousands) Probability $ 60 0.1 65 0.2 80 0.4 95 0.2 100 0.1 Crenshaw Village Yearly Aftertax Cash Inflow (in thousands) Probability $ 65 0.2 70 0.3 80 0.4 90 0.1 Find the expected cash flow from each apartment complex. Expected cash flow (in thousands) palmer heights crenshaw village

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