Jack is an entrepreneur and small business owner. However he is bad with numbers
ID: 1094714 • Letter: J
Question
Jack is an entrepreneur and small business owner. However he is bad with numbers and would like to visualize his money as cash flow diagrams that represent a summary 0f earh small butincis that hr owns. Additionally he would like advice on how his business is performing Mow arr expensesand revenues for the past five years the business has been open. Construct a cast flow diagram for the business and use the analysis techniques covered in class to provde Jack with some useful feedback including (but not limited to) present worth, annual worth, and future worth in five year (assuming income and expenses rema.n the same). Assume an interest rate of 4%.Explanation / Answer
cash flow
year 2008 = - 550000
cash flow for year 2009 - 2013
= 200000 - 105000 = 95000
Present worth
= -550000 + 95000 * [1-(1+0.04)^-5]/0.04
= -127076.88
future worth
= -550000 * 1.04^5 + 95000 * [(1.04)^5 -1]/0.04
= -154608.45
hence his business is not performing well
since its present worth and future worth are negative
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