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Unformatted text preview: Also suppose that Steven expects to sell the pharmacy at the end of three years for $70,000 more than the price he paid for it and that he requires a 15 percent return on his investment. Should he still purchase the pharmacy? Analytical Steps: 1) Build a pro forma (forecasted) income statement for the years 2008, 2009, 2010. What would be the net profit if Steven purchases the pharmacy? 2) Now determine any initial investment cash flows and termination cash flows and use along with the operating cash flows in question 1, to determine the net present value of the stream of profits. Should Steven purchase the pharmacy or take the job as manager of the other pharmacy? Why? 1 Based on Integrating Problem 12, p. 31, Dominick Salvatore, Managerial Economics in a Global Economy, Fourth Edition , Southwestern, Thompson Learning, 2001....
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This note was uploaded on 09/05/2011 for the course FIN 4405 taught by Professor Cowan during the Spring '11 term at Fairleigh Dickinson.
- Spring '11