Prolbem: Capital Budgeting
Your neighborhood laundromat is for sale and a friend is considering investing in this business. Your friend has asked for your financial advice regarding this endeavor.
For the business alone and no other assets (such as the building and land), the purchase price is $250,000. The net cash flows for the project are $30,000 per year for the next 5 years. The plan is to borrow the money for this investment at 5%.
You will need to submit a presentation sharing your recommendation. You will need to address the following questions:
A. What is the net present value of this project? Use the calculations covered in this week's Video to calculate the net present value.
B. Calculate the simple payback period for this project. Your desired payback period is 5 years. How long is the payback period for this project?
C. How would you evaluate this investment? What would be a good price at which to purchase this business?
Prepare the calculations to determine if the laundromat is a good investment. In a 15 slide presentation, show your calculations and recommendations on whether to purchase the laundromat. Be sure to address the questions above in the presentation.
The response must include a reference list. Using one-inch margins, double-space, Times New Roman 12 pnt font and APA style of writing and citations.