Posted: November 17th, 2022
Bill Anders retires in 5 years. He would have to purchase equipment costing $500,000
Bill Anders retires in 5 years. He would have to purchase equipment costing $500,000 to equip the outlet and invest an additional $150,000 for inventories and other working capital needs. Other outlets in the fast-food chain have an annual net cash inflow of about $150,000. Mr. Anders would close the outlet in 5 years. He estimates that the equipment could be sold at that time for about 10% of its original cost. Mr. Anders’ required rate of return is 16%. Required: Part A: What is the investment’s net present value when the discount rate is 16%? Part B: Refer to your calculations. Is this an acceptable investment? Why or why notFor PV 16% numbers are yr 0 – 1 yr1 – .862 yr2 – .743 yr3 .641 yr4. .552 yr5. .476