What price should the first scenario option sell

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Question - Scenario - Edward believes that he can get bank financing for 75% of the assets (equipment, building, and working capital) over a seven-year period at an APR of 7% compounded month- ly. He plans to put in the rest of the money with a loan from his family, which he will pay back in 10 equal yearly installments with no interest. Edward estimates the business can be sold for $900,000 at end of Year 10.

Required - If Edward believes that he needs to get a bonus of $20,000 per year for the extra effort that he will be putting into the business, for what price should the first scenario option sell for at the end of 10 years? The bonus will be treated as an additional expense and will be included as a part of the COGS.

Reference no: EM133169423

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