Hayley buys coffee shop. The coffee shop costs $2 million, has an annual revenue of $1.3 million,...

Question:

Hayley buys coffee shop. The coffee shop costs $2 million, has an annual revenue of $1.3 million, and only costs $500,000 per year to operate.

What is the net present value and the annual worth of Hayley's investment up through the end of the sixth year of operation? Hayley has a discount rate of %25.

Net Present Value:

The net present value equals the present value of future benefits minus the present value of future costs. The present value equals the discounted future values at the market interest rate.

Answer and Explanation:

Hayley buys coffee shop. The coffee shop costs $2 million, has an annual revenue of $1.3 million, and only costs $500,000 per year to operate.

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How to Calculate Net Present Value: Definition, Formula & Analysis

from Financial Accounting: Help and Review

Chapter 5 / Lesson 20
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