Principles of Accounting
12th Edition
ISBN: 9781133626985
Author: Belverd E. Needles, Marian Powers, Susan V. Crosson
Publisher: Cengage Learning
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Chapter 11, Problem 12EA
To determine
Compute the present value of the machine to Person P.
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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 buyer is considering purchasing a 10-acre parcel in Peoria, Arizona for economic development. The parcel has a sales price of $720,000. The buyer agrees with the seller for purchasing the property with 15% down up front and paying off the balance in 12-months. If a bank is willing to provide 3% annual interest, compounded monthly, how much should the monthly deposit be into that account to pay off the desired balance to the seller?
Chad Tayler would like to purchase a printing business from its owners. Chad anticipates that the business will generate cash flows of $80,000 per year for the next 10 years. At the end of 10 years. Chad intends to sell the store for an estimated $500,000.
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Once Determine Chad Taylor has the following choices to purchase the printing business:
1 pay the maximum price determined in the previous questions in cash.
2. Obtain a 10-year mortgage for the maximum price in the question with an annual payment of 120,000
What the pros and cons for each option
what is the interest rate of the mortgage
which payment option would you choose?
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