{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Prob 6-6

# Prob 6-6 - Assig nment Pr int View Score 100 6 out of 100...

This preview shows pages 1–2. Sign up to view the full content.

2/25/14 Assignment Print View ezto.mhecloud.mcgraw-hill.com/hm_accounting.tpx?todo=printviewSingle 1/2 Score: 100 out of 100 points (100%) 6. aw ard: 25 out of 25.00 points John and Sally Claussen are contemplating the purchase of a hardware store from John Duggan. The Claussens anticipate that the store will generate cash flows of \$70,000 per year for 20 years. At the end of 20 years, they intend to sell the store for an estimated \$400,000. The Claussens will finance the investment with a variable rate mortgage. Interest rates will increase twice during the 20-year life of the mortgage. Accordingly, the Claussens’ desired rate of return on this investment varies as follows ( FV of \$1 , PV of \$1 , FVA of \$1 , PVA of \$1 , FVAD of \$1 and PVAD of \$1 ) (Use appropriate factor(s) from the tables provided.) Years 1–5 8% Years 6–10 10% Years 11–20 12% Required: What is the maximum amount the Claussens should pay John Duggan for the hardware store? (Assume that all cash flows occur at the end of the year.) \$ \$ \$ \$ PV of \$70,000 cash flow PV of \$400,000 selling price Maximum paid

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}