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(Ignore income taxes in this problem.) Jane Summers has just inherited $610,000 from her mother's estate. She is considering investing part of these funds in a small catering business. She would need to purchase a delivery van and various equipment costing $101,000 to equip the business and another $50,200 for inventories and other working capital needs. Rent on the building used by the business will be $24,300 per year. Jane's marketing studies indicate that the annual cash inflow from the business will amount to $90,500. In addition to the building rent, other annual cash outflows for operating costs will amount to $30,300. Jane wants to operate the catering business for only five years. She estimates that the equipment could be sold at that time for about 10% of its original cost. Jane's required rate of return is 15%.

Compute the net present value of this investment. (Input the amount as a positive value. Round "PV Factor" to 3 decimal places. Round your other intermediate calculations and final answers to the nearest whole dollar.)

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92319425

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