Determine the present value

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Reference no: EM133102703

Question - John Wiggins is considering the purchase of a small restaurant. The purchase price listed by the seller is $840,000. 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

$84,000

7

$74,000

8

$64,000

9

$54,000

10

$44,000

If purchased, the restaurant would be held for 10 years and then sold for an estimated $740,000. Determine the present value, assuming that John desires an 11% rate of return on this investment.

Reference no: EM133102703

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