Ask Question
BusinessBusiness
15 November, 01:45

You want to start your own consulting business and believe it could produce cash flows of $5,600, $48,200, and $125,000 at the end of each of the next three years, respectively. At the end of three years you think you can sell the business for $450,000. At a 14 percent discount rate, what is this business idea worth today

+2
Answers (1)
  1. 15 November, 02:10
    0
    This business idea worth $430,127 today

    Explanation:

    Today value of the future cash flows can be calculated by discounting the cash flows on the given discount rate. It is called the present value and sum of present value of all cash flows is called Net present value.

    We use following format to calculate NPV for the given business idea

    Years 1 2 3

    Cash Flows $5,600 $48,200 $125,000

    Sale Proceeds $450,000

    Net Cash Flows $5,600 $48,200 $575,000

    Discount Factor 14% 0.8772 0.7695 0.6750

    Present values $4,912.32 $37,089.9 $388,125

    Net present value of business idea = $4,912.32 + $37,089.9 + $388,125

    NPV = 430,127.22
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “You want to start your own consulting business and believe it could produce cash flows of $5,600, $48,200, and $125,000 at the end of each ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
Dr. Abaee is developing a new intelligence test. He gives his test to a group of 100 participants and records their scores.
Answers (1)
Kaelker corporation reports that at an activity level of 7,000 units, its total variable cost is $590,730 and its total fixed cost is $372,750.
Answers (1)
Suppose there are two possible outcomes if a new policy is instituted to improve air quality. There is a 30% chance it will produce $20 million in economic benefits, and a 70% chance it will produce $40 million in benefits.
Answers (1)
1, 1, 2, 3, 4, 5, 8, 13, 21 - which one doesn't belong to this series?
Answers (1)
Individual credit card balances for a decedent are listed on which schedule of form 706?
Answers (1)
New Questions in Business
Thirty-two new employees from Market Enterprises are attending orientation, receiving information about company policies, and filling out various forms. These employees comprise a group. 1. True2. False
Answers (1)
Which of the following statements is true? a. The required return on a firm's common stock is, in theory, determined solely by its market risk.
Answers (1)
Jack is preparing for a party and makes potato salad, but he does not realize that the salad contains one escherichia coli bacterium. he accidentally leaves the salad out of the refrigerator for 2 hours. if e.
Answers (1)
You feel that you will need $2.8 million in your retirement account and when you reach that amount, you plan to retire. You feel you can earn an APR of 10.8 percent compounded monthly and plan to save $395 per month until you reach your goal.
Answers (1)
Golden Eagle Company prepares monthly financial statements for its bank. The November 30 and December 31 adjusted trial balances include the following account information:30-Nov 31-Decdebit credit debit creditsupplies $ 2,000 $ 3,500 prepaid
Answers (1)
Home » Business » You want to start your own consulting business and believe it could produce cash flows of $5,600, $48,200, and $125,000 at the end of each of the next three years, respectively.
Sign Up Forgot Password?