Assignment Details
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%.
You will need to share your recommendation and you must address the following questions:
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)
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: Show your calculations and recommendations on whether to purchase the laundromat. Be sure to address the questions below.
1. WHAT IS NET PRESENT VALUE?
2. ADVANTAGES AND DISADVANTAGES OF NPV
3. WHAT IS THE PAYBACK APPROACH?
4. ADVANTAGES AND DISADVANTAGES OF THE PAYBACK APPROACH
5. LAUDROMAT INVESTMENT PARAMETERS
6. NET PRESENT VALUE CALCULATION
7. PAYBACK CALCULATION
8. DISCUSS WHETHER OR NOT IT IS A GOOD INVESTMENT
9. RENEGOTIATION OF AN ALTERNATIVE DEAL
10. SHOW DIFFERENT NPV
11. SHOW DIFFERENT PAYBACK
CONCLUSION
REFERENCES
Body slides: This begins on the slide following the title slide and must be double-spaced (be careful not to triple- or quadruple-space between paragraphs). The typeface should be 12-pt. Times Roman or 12-pt. Courier in regular black type. Do not use color, bold type, or italics, except as required for APA-level headings and references. In-body academic citations to support your decisions and analysis are required. A variety of academic sources is encouraged.
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