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Problem 5-5(Algo) Investment decision; varying rates [LO5-3,5-8] The Claussens are considering the purchase of...

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Accounting

Problem 5-5(Algo) Investment decision; varying rates [LO5-3,5-8]
The Claussens are considering the purchase of a hardware store. The Claussens anticipate that the store will generate cash
flows of $84,000 per year for 20 years. At the end of 20 years, they intend to sell the store for an estimated $540,000. The
Claussens will finance the investment with a variable rate mortgage. Interest rates will increase twice during the 20-year life
of the mortgage. Accordingly, the Claussens' desired rate of return on this investment varies as follows:
Required:
What is the maximum amount the Claussens should pay for the hardware store? (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)
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