Problem: 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: a) A Net Present Value calculation, b) a Simple Payback Period calculation, and c) the answer to question regarding whether this is a good investment and what the best price should be.
The response should include a reference list. One-inch margins, Using Times New Roman 12 pnt font, double-space and APA style of writing and citations.