An entrepreneur had projections done for a potential yogurt shop to be developed

Question

An entrepreneur had projections done for a potential yogurt shop to be developed in a certain part of town. He had a group do a spectacular market analysis on the pricing, market demand, and revenue flows over a 5-year period. The projected cash flows are shown below. End of Year: 1 2 3 4 5 $ 100,000 $ 250,0000 $ 400,000 $500,000 $500,000 If this particular entrepreneur demands a 25% return on all his investments, what is the MOST he would be willing to invest in up-front money to make this project successful? (8 points

Explanation / Answer

Investment = 100,000/1.25 + 250,0000/1.25^2 + 400,000/1.25^3 + 500,000/1.25^4 + 500,000/1.25^5 = $2,253,440

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