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As a new migrant, Lisa is currently considering to buy a bottle shop which will be...

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Finance

  1. As a new migrant, Lisa is currently considering to buy a bottleshop which will be in operation for 10 years. If purchased, thebottle shop is expected to generate a first cash flow of $90,000this year which is expected to grow at 6.5% p.a. The offer topurchase the business is $500,000. She plans to borrow this moneyfrom one of her friends and he requires 14.5% rate of returnp.a.   Evaluate this project and identify if it is worthbuying.

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4.3 Ratings (771 Votes)
In order to determine whether the investment is worth it or notLisa needs to determine the NPV of the investment The NPV is thenet present value of all the cashflows of a project over its lifeThe general formula of NPV isHere Ci is the    See Answer
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As a new migrant, Lisa is currently considering to buy a bottleshop which will be in operation for 10 years. If purchased, thebottle shop is expected to generate a first cash flow of $90,000this year which is expected to grow at 6.5% p.a. The offer topurchase the business is $500,000. She plans to borrow this moneyfrom one of her friends and he requires 14.5% rate of returnp.a.   Evaluate this project and identify if it is worthbuying.

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