A restaurant is for sale for $200,000.It is estimated that the restaurant will earn $20,000 a year for the next 15 years.At the end of 15 years,it is estimated that the restaurant will sell for $350,000.Which of the following would be MOST LIKELY to occur if the investor's required rate of return is 15 percent?

Question

Quizplus · Accepted Answer

The investor's required rate of return is 15%, which is higher than the estimated annual earnings of $20,000. This means that the investment will not be profitable, and the investor would not pursue the project. The estimated sale price at the end of 15 years does not make up for the lack of profitability during the holding period.

A Restaurant Is for Sale for $200,000