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Deal or No Deal?
Your neighborhood self-service laundry is for sale and you consider investing in this business. For the business alone and no other assets (such as building and land), the purchase price is $240,000. The net cash flows for the project are $30,000 per year for the next 5 years. You plan to borrow the money for this investment at 5%.
- Prepare a net present value calculation for this project. What is the net present value of this project?
- Calculate the simple payback period for this project. Your desired payback period is 5 years. How long is the payback period for this project?
- Is this a good investment? What would be a good price at which to purchase this business?
Submit an Excel spreadsheet which must include the answers to all 3 questions: 1) A Net Present Value calculation, 2) a Simple Payback Period calculation, and 3) the answer to question regarding whether this is a good investment and what the best price should be.
The use of 1 scholarly source (e.g., textbook, article from the CEC Library) is required.