What is the current value of the expected cash flow stream?
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You intend to set up a mail order gift basket business in your home while you attend college. You expect the following cash flows:
Year Cash Flow
1 $5,000.00
2 $8,000.00
3 $1,200.00
4 $1,400.00
You can borrow at 11% to start this business. What is the current value of the expected cash flow stream?
Will it return a higher rate (IRR) than your borrowing costs if you must invest $10,000 today to begin the business?
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Solution Summary
The solution calculates the expected cash flow and internal rate of returns.
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