Helga is considering the purchase of a small restaurant. The purchase price listed by the seller is $980,000. Helga has used past financial information to estimate that the net cash flows (cash inflows less cash outflows) generated by the restaurant would be as follows:
Years Amount
1-6 $ 98,000
7 88,000
8 78,000
9 68,000
10 58,000
If purchased, the restaurant would be held for 10 years and then sold for an estimated $880,000.
Required:
Determine the present value, assuming that Helga desires a 12% rate of return on this investment. (Assume that all cash flows occur at the end of the year.)
Note: Do not round intermediate calculations. Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
