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You purchased a piece of property yesterday for $100,000. You are deciding whether or not you should build a restaurant on the property or a book store. If you build a restaurant, it would cost you $250,000 to build it, and then you would have cash flows as follows: $160,000 in year 1, $60,000 in year 2, $55,000 in year 3, $55,000 in year 4, and $40,000 in year 5.

If you build a bookstore, it would cost you $150,000 to build it, and then you would have cash flows as follows: $35000 per year for 10 years.

Additionally, Bob has offered you $105,000 for the land.

What should you do and why? (Assume that your required return is 10%)

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92865579

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