FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Q9&C i
18
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Bruce is considering the purchase of a restaurant named Hard Rock Hollywood. 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:
Amount
Years
1 to 6
$93,000 (each year)
7
103,000
8
113,000
9
10
123,000
133,000
Bruce expects to sell the restaurant after 10 years for an estimated $1,230,000. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use
tables, 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 12% 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.)
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.
Req 1A
Req 1B
Calculate the total present value of the net cash flows if Bruce wants to make at least 12% 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 value
<Req 1A
Req 1B >
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Transcribed Image Text:Q9&C i 18 Saved Bruce is considering the purchase of a restaurant named Hard Rock Hollywood. 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: Amount Years 1 to 6 $93,000 (each year) 7 103,000 8 113,000 9 10 123,000 133,000 Bruce expects to sell the restaurant after 10 years for an estimated $1,230,000. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use tables, 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 12% 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.) 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. Req 1A Req 1B Calculate the total present value of the net cash flows if Bruce wants to make at least 12% 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 value <Req 1A Req 1B >
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