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Problem:

An entrepreneur wants to purchase a particular small business. The asking price is $5 million. He expects to improve the business's operations over a period of five years and sell it at a handsome profit. To help him achieve this goal, a wealthy aunt is willing to loan the entrepreneur $5 million for five years at zero percent interest.

Required:

Question: Given this loan, what is the lowest rate of return the entrepreneur should be willing to accept on purchase of the business? Why?

Note: Explain all calculation and formulas.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91169740

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