Bruce is considering the purchase of a restaurant named Hard Rock Hollywood. The restaurant is listed for sale at $1,180,000. 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 $98,000 (each year)
7 108,000
8 118,000
9 128,000
10 138,000
expects to sell the restaurant after 10 years for an estimated $1,280,000. (FV of $1, PV of $1, FVA of $1, and PVA of $1).
Required:
1) Calculate the total present value of the net cash flows if Bruce wants to make at least 10% annually on his investment.
Answers: 2
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