John and Sally Cieusm are contemplating the purchase of 3 hardware store from Juhn Duggan. The
Claussens anticipate that the store will generate cash ?ows of $36,000 per year for 20 years. Atthe end of
20 years, they intend to sell the store for an estimated $560,000. The Cleussens will ?nance nvestment
with a variable rate mortgage. Interest rates will inn-ease twice during the ECLyear life cf the mortgage.
Accordingly. the Claussens’ desired rate of return on this investment vanes as follows: (FV of 51, PV of 51,
FVA of $1, PVA uf$1 FVAD of $1 and PVAD of $1) [Use appropriate lactorls) lrem the tables
provided.) Years 1—5 8%
Years 5—10 10%
?re]??? .12"? Required: What is the maximum amount the Claussens should payJohn Duggan for the hardware store? (Assume
that all cash ?ows occur at the end dl the year.)