Question

You are planning to purchase a restaurant and are wondering how much to pay for it. You’ve estimated that the restaurant will generate $382,421 per year for the next 16 years, starting next year. If you want to earn 11.79% on your investments, how much should you pay for the restaurant today?

You have an investment that pays $5,026 each year for 4 years, starting next year. The interest rate is 4.5% compounded annually. What is the present value of this investment?

Cash-flow A consists of a level annuity of 7 equal payments of $10,486 starting in year 5 and a lump sum of $144,680 in year 13. If the interest rate is 4.52%, what is the present value of cash-flow A?

Answer 1

Formulas Used:-

Annual Revenue	382421
Tenure	16
Rate	0.1179
Amount to be paid for Resturant	=PV(B3,B2,-B1)
Amount of Annul Payment	5026
Time	4
Interest Rate	0.045
Present Value of Investment	=PV(B8,B7,-B6)
No of equal payments	7
Amount of Payment	10486
Amount after 13 years	144608
Rate	0.0452
Present Value	=PV(B14,B11,-B12)+PV(B14,13,-B13)

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