After slaving for others, you finally decided to go to Rio and open a small bistro...

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After slaving for others, you finally decided to go toRio and open a small bistro so you can enjoy the free time andpartake in the festivities of the Carnaval do Brasil. You find anexcellent location and the owner of an old bistro is willing tosell his store for $120,000. He gives you a nice cup of espressoand while talking he gives out the details of his operation: Youput them in the right order as follows:
Cash $18,000 Bank loans $6,000
Receivables 6,000 Payables 12,000
Inventories 39,000 Accruals 3,000
Net fixed assets 42,000 Net worth 84,000
Total Liabilities
Total assets 105,000 Net worth 105,000
Annual pretax earnings (after rent, interest, andsalaries) have averaged $24,000
For the preceding three years. The store has been inthis location for a long time and has a six years remaining on a10-year lease. The purchase price includes all assets except cash.The liabilities have to be assumed by you, the buyer.
Would you pay the asking price or is $120,000 areasonable offer?
What other factors should you consider in arriving atthe purchase price?
What is the significance of the lease, ifany?

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After slaving for others, you finally decided to go toRio and open a small bistro so you can enjoy the free time andpartake in the festivities of the Carnaval do Brasil. You find anexcellent location and the owner of an old bistro is willing tosell his store for $120,000. He gives you a nice cup of espressoand while talking he gives out the details of his operation: Youput them in the right order as follows:Cash $18,000 Bank loans $6,000Receivables 6,000 Payables 12,000Inventories 39,000 Accruals 3,000Net fixed assets 42,000 Net worth 84,000Total LiabilitiesTotal assets 105,000 Net worth 105,000Annual pretax earnings (after rent, interest, andsalaries) have averaged $24,000For the preceding three years. The store has been inthis location for a long time and has a six years remaining on a10-year lease. The purchase price includes all assets except cash.The liabilities have to be assumed by you, the buyer.Would you pay the asking price or is $120,000 areasonable offer?What other factors should you consider in arriving atthe purchase price?What is the significance of the lease, ifany?