Would you advise jim to make this investment

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Reference no: EM131291878

(Ignore income taxes in this problem) bobby is considering starting a small catering business. he would need to purchase a delivery van and various equipment costing $132,000 to equip the business and another $54,500 for inventories and other working capital needs. Rent for the building used by the business will be $32,000 per year. jim's marketing studies indicate that the annual cash inflow from the business will amount to $127,000. In addition to building rent, annual cash outflow for operating costs will amount to $34,000. Bobby wants to operate the catering business for only seven years. He estimates that the equipment could be sold at that time for 3% of its original cost. Jim uses a 14% discount rate.

Would you advise jim to make this investment? show your work to justify the answer.

Reference no: EM131291878

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