You receive a phone proposal to invest in a new business. The caller informs you that it will take a $70,000 down payment and the investment will earn $10,000 a year for the next 10 years.  He tells you that the investment will return 14 percent. a) If current interest rates are 8 percent, what is the present value of the investment? (Please provide in excel with explanation of the math) b) How did the caller get 14 percent?

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 10PB: Bouvier Restaurant is considering an investment in a grill that costs $140,000, and will produce...
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#2 You receive a phone proposal to invest in a new business. The caller informs you that it will take a $70,000 down payment and the investment will earn $10,000 a year for the next 10 years.  He tells you that the investment will return 14 percent.

a) If current interest rates are 8 percent, what is the present value of the investment? (Please provide in excel with explanation of the math)

b) How did the caller get 14 percent?

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