hellenic vultures is expected to generate $100,000 of net cash flows next year,

ID: 2726014 • Letter: H

Question

hellenic vultures is expected to generate $100,000 of net cash flows next year, $120,000 the year after and $150,000 for the following three years. It is expected that the firm could be sold for $500,000 at the end of the fifth year. The owners of Hellenic Vultures, who would like to sell their firm, strongly believe that their investment in the firm should generate a 10% return. What is the minimum price at which they should sell the firm? hellenic vultures is expected to generate $100,000 of net cash flows next year, $120,000 the year after and $150,000 for the following three years. It is expected that the firm could be sold for $500,000 at the end of the fifth year. The owners of Hellenic Vultures, who would like to sell their firm, strongly believe that their investment in the firm should generate a 10% return. What is the minimum price at which they should sell the firm? hellenic vultures is expected to generate $100,000 of net cash flows next year, $120,000 the year after and $150,000 for the following three years. It is expected that the firm could be sold for $500,000 at the end of the fifth year. The owners of Hellenic Vultures, who would like to sell their firm, strongly believe that their investment in the firm should generate a 10% return. What is the minimum price at which they should sell the firm?

Explanation / Answer

minimum price at which they should sell the firm = present value of cashflows

Year

Cash flows

PVF (10%)

Present value of cashflows

$100000

0.9091

90909

$120000

0.8264

99173

$150000

0.7513

112697

0.6830

$500000

0.6209

310461

613240

Minimum price at which they should sell the firm = 613240