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Southeastern travel is considering acquiring sunshine tour. management believes sunshine tour can generate cash flows of...

Southeastern travel is considering acquiring sunshine tour. management believes sunshine tour can generate cash flows of $157,000, $200,000, and $235,000 over the next three years, respectively. after that time, they feel the business will be worthless, Southeastern travel has determined that a 10.5 percent rate of return is applicable to this acquisition. what is southern travel willing to pay today to acquire sunshine tour?

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Expert Solution

southern travel willing to pay today to acquire sunshine tour          480,051.34
Statement showing Cash flows
Particulars Time PVF 10.5% Amount PV
CashFlows                       1.00                         0.9050           157,000.00           142,081.45
CashFlows                     2.00                         0.8190           200,000.00           163,796.81
CashFlows                     3.00                         0.7412           235,000.00           174,173.08
Present value of CashFlows           480,051.34

jeff jeffy answered 2 years ago
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