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Pablo owns a yoga studio that has a cost of capital of 6.19 percent. The yoga...

Pablo owns a yoga studio that has a cost of capital of 6.19 percent. The yoga studio is expected to produce annual cash flows of 59,900 dollars for 5 years. The first annual cash flow of 59,900 dollars is expected later today. In addition to the annual cash flows of 59,900 dollars, the yoga studio is also expected to produce a special, one-time cash flow of 67,267 dollars in 2 years from today. How much is Pablo’s yoga studio worth?

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Expert Solution

Discount rate 6.1900%
Cash flows Year Discounted CF= cash flows/(1+rate)^year Cumulative cash flow
             59,900.000 0                             59,900.00                          59,900.00
             59,900.000 1                             56,408.32                       116,308.32
             59,900.000 2                             53,120.19                     169,428.510
             67,267.000 2                             59,653.35                       229,081.86
             59,900.000 3                             50,023.72                       279,105.57
             59,900.000 4                             47,107.75                       326,213.32

worth of the studio = 326,213.32

jeff jeffy answered 1 year ago
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