Question

Raj owns a trampoline park that has a cost of capital of 5.2 percent. The trampoline park is expected to produce annual cash flows of 59,753 dollars for 9 years. The first annual cash flow of 59,753 dollars is expected later today. In addition to the annual cash flows of 59,753 dollars, the trampoline park is also expected to produce a special, one-time cash flow of 35,478 dollars in 4 years from today. How much is Raj’s trampoline park worth?

Answer 1

Present worth of Trampoline park = PV of annual cash using annuity due + PV of One time cash flow = (1+5.2%)*59,753*(1-(1+5.2%)^-9)/(1+5.2%) + 35,478/(1+5.2%)⁴ = 471,812.70

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