question archive A small craft store located in a kiosk expects to generate annual cash flows of $6,800 for the next three years
A small craft store located in a kiosk expects to generate annual cash flows of $6,800 for the next three years
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A small craft store located in a kiosk expects to generate annual cash flows of $6,800 for the next three years. At the end of the three years, the business is expected to be sold for $15,000. What is the value of this business at a discount rate of 15 percent?
$30,100.07
$29,408.27
$25,388.67
$17,409.09
$19,477.67
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Answer:
| Year | Cash flow | PVF@15% | Present value |
| 1 | $ 6,800.00 | 0.870 | $ 5,913.04 |
| 2 | $ 6,800.00 | 0.756 | $ 5,141.78 |
| 3 | $ 21,800.00 | 0.658 | $ 14,333.85 |
| Value of business | $ 25,388.67 | ||
