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How long is the payback period for the project

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Your neighborhood laundromat is for sale and a friend is considering investing in this business. Your friend has asked for your financial advice regarding this endeavor.

  • For the business alone and no other assets (such as the building and land), the purchase price is $250,000. The net cash flows for the project are $30,000 per year for the next 5 years. The plan is to borrow the money for this investment at 5%.

Problem 1: What is the net present value of this project? Use the calculations covered in this week's Video to calculate the net present value.

Problem 2: Calculate the simple payback period for this project. Your desired payback period is 5 years. How long is the payback period for this project?

Problem 3: How would you evaluate this investment? What would be a good price at which to purchase this business?

Reference no: EM132841314

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