Home Book Store Instructors Independent Authors About An entrepreneur invests $6
ID: 2821932 • Letter: H
Question
Home Book Store Instructors Independent Authors About An entrepreneur invests $61,036.00 into a start-up business today. He expects the business wil generate $64,106.00 per year for 14.00 years, and then it will generate $130,738.00 per year for the following 16.00 years. Suppose he wants a 9.00% annual return to run the business. What i the value of this business today if his forecasts are accurate? (HINT: Discount all cash flows to today and subtract start-up investment.) Answer Format: Currency: Round to: 2 decimal places. Enter Answer Here... Submit Answer Prev ProblemExplanation / Answer
NPV = Value of Business today = $763,314.21
Discount rate = R =
9.00%
Present Values (PV)
Year
Cash flows
Discount factor or PV factors = Df = 1/(1+R)^Year
PV of cash flows = Cash flows x Df
0
-$61,036.00
1.000000
-$61,036.00
1
$64,106.00
0.917431
$58,812.84
2
$64,106.00
0.841680
$53,956.74
3
$64,106.00
0.772183
$49,501.59
4
$64,106.00
0.708425
$45,414.31
5
$64,106.00
0.649931
$41,664.50
6
$64,106.00
0.596267
$38,224.31
7
$64,106.00
0.547034
$35,068.18
8
$64,106.00
0.501866
$32,172.64
9
$64,106.00
0.460428
$29,516.18
10
$64,106.00
0.422411
$27,079.07
11
$64,106.00
0.387533
$24,843.18
12
$64,106.00
0.355535
$22,791.91
13
$64,106.00
0.326179
$20,910.01
14
$64,106.00
0.299246
$19,183.49
15
$130,738.00
0.274538
$35,892.55
16
$130,738.00
0.251870
$32,928.95
17
$130,738.00
0.231073
$30,210.04
18
$130,738.00
0.211994
$27,715.64
19
$130,738.00
0.194490
$25,427.19
20
$130,738.00
0.178431
$23,327.70
21
$130,738.00
0.163698
$21,401.56
22
$130,738.00
0.150182
$19,634.46
23
$130,738.00
0.137781
$18,013.26
24
$130,738.00
0.126405
$16,525.93
25
$130,738.00
0.115968
$15,161.40
26
$130,738.00
0.106393
$13,909.54
27
$130,738.00
0.097608
$12,761.05
28
$130,738.00
0.089548
$11,707.38
29
$130,738.00
0.082155
$10,740.72
30
$130,738.00
0.075371
$9,853.87
Total of PV = NPV =
$763,314.21
Discount rate = R =
9.00%
Present Values (PV)
Year
Cash flows
Discount factor or PV factors = Df = 1/(1+R)^Year
PV of cash flows = Cash flows x Df
0
-$61,036.00
1.000000
-$61,036.00
1
$64,106.00
0.917431
$58,812.84
2
$64,106.00
0.841680
$53,956.74
3
$64,106.00
0.772183
$49,501.59
4
$64,106.00
0.708425
$45,414.31
5
$64,106.00
0.649931
$41,664.50
6
$64,106.00
0.596267
$38,224.31
7
$64,106.00
0.547034
$35,068.18
8
$64,106.00
0.501866
$32,172.64
9
$64,106.00
0.460428
$29,516.18
10
$64,106.00
0.422411
$27,079.07
11
$64,106.00
0.387533
$24,843.18
12
$64,106.00
0.355535
$22,791.91
13
$64,106.00
0.326179
$20,910.01
14
$64,106.00
0.299246
$19,183.49
15
$130,738.00
0.274538
$35,892.55
16
$130,738.00
0.251870
$32,928.95
17
$130,738.00
0.231073
$30,210.04
18
$130,738.00
0.211994
$27,715.64
19
$130,738.00
0.194490
$25,427.19
20
$130,738.00
0.178431
$23,327.70
21
$130,738.00
0.163698
$21,401.56
22
$130,738.00
0.150182
$19,634.46
23
$130,738.00
0.137781
$18,013.26
24
$130,738.00
0.126405
$16,525.93
25
$130,738.00
0.115968
$15,161.40
26
$130,738.00
0.106393
$13,909.54
27
$130,738.00
0.097608
$12,761.05
28
$130,738.00
0.089548
$11,707.38
29
$130,738.00
0.082155
$10,740.72
30
$130,738.00
0.075371
$9,853.87
Total of PV = NPV =
$763,314.21
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