You want to buy a business with an annual cash flow of $28,000 for 10 years. 10 POINTS if u are correct! Help!?

b) You want to buy a business with an annual cash flow of $28,000 for ten years. If you can invest at 5% what would be the maximum purchase price you would be willing to pay today?

Interest rate- Purchase price of business:

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You would like to purchase your first home in 10 years at a cost of $100,000. You currently have a savings account accumulating interest at the rate of 5.5% compounded annually with a balance of $20,000. How much additional money will you have to deposit today to accumulate the purchase price in ten years?

Interest rate- Additional deposit to savings account:

Number of period-

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1 Answer

  • Don G
    Lv 7
    7 years ago
    Favorite Answer

    You want the PV of an Annuity of 28,000, N 10, R 5%. That's 216,209. The factor is 7.7217 x 28,000.

    To have 100,000 in 10 yrs, at 5.5%, you need its PV. That's 58,543. You have 20,000, so you need to invest an additional 38,543 today. The factor is .5854 x 100,000 = 58,540.

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