you are thinking of buying a craft emporium, it is expected to generate cash flo

Question

you are thinking of buying a craft emporium, it is expected to generate cash flows of 30,000 per year in years 1 through 5, and $40,000 per year in 6 through 10. if the appropriate discount rate is 8 % , what amount are you willing to pay for the emporium? you are thinking of buying a craft emporium, it is expected to generate cash flows of 30,000 per year in years 1 through 5, and $40,000 per year in 6 through 10. if the appropriate discount rate is 8 % , what amount are you willing to pay for the emporium? you are thinking of buying a craft emporium, it is expected to generate cash flows of 30,000 per year in years 1 through 5, and $40,000 per year in 6 through 10. if the appropriate discount rate is 8 % , what amount are you willing to pay for the emporium?

Explanation / Answer

Year Cashflows PVF@8% Present value 1 $    30,000 0.926 $            27,778 2 $    30,000 0.857 $            25,720 3 $    30,000 0.794 $            23,815 4 $    30,000 0.735 $            22,051 5 $    30,000 0.681 $            20,417 6 $    40,000 0.630 $            25,207 7 $    40,000 0.583 $            23,340 8 $    40,000 0.540 $            21,611 9 $    40,000 0.500 $            20,010 10 $    40,000 0.463 $            18,528 Maximum amount can be paid $         228,476

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