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 $260,000. The net cash flows for the project are $32,000 per year for the next 5 years. The plan is to borrow the money for this investment at 6%.
Part A: Calculate the Net Present Value and Payback Period:
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?
Use the following template to complete the Unit 4 Excel spreadsheet (IP): Unit 4 IP Assignment Template
Part B: Evaluate the investment and provide calculations for an alternative deal:
How would you evaluate this investment? What would be a good price at which to purchase this business?
Part C: 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.
