Question

you are thinking of buying a craft emporium. It is expected to generate cash flows of Rs. 30,000 per year in years 1 through 5, and Rs. 40,000 per year in years 6 through 10. If the appropriate discount rate is 8%, what amount are you willing to pay for the emporium??

Answer 1

The amount are i am willing to pay for the emporium is $228,476

Step-by-step explanation:

PV= 30000/1.08 + (30000/1.08^2) + (30000/1.08^3) + ((30000/1.08^4) +((30000/1.08^5) + (40000/1.08^6) +(40000/1.08^7) +((40000/1.08^8) +((40000/1.08^9) + ((40000/1.08^10)

PV =27,778 + 25,720 + 23,815 + 22,051 + 20,417 + 25,207 + 23,340 + 21,611 + 20,010 + 18,528

= $228,476