Cash Flows

Foodelicious Corp. is evaluating whether it should purchase an ethnic restaurant in Manhattan. The current owner had originally signed a 25-year lease, of which 16 years still remain. Foodelicious Corp. expects the restaurant to continue to have sales (and net cash flows) of about the same for the remainder of the lease. Last year, the restaurant brought in net cash flows of $310,000.  The current owner is asking $1,950,000 for the business. If Foodelicious evaluates similar investments using a 15 percent discount rate, what is the present value of this investment?  Should it take over the investment?  Show all calculations to help Foodelicious make a decision.

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