The South End bookstore has an annual profit of $285,000. The owner may open a new bookstore by leasing an existing building for 5 years with an option to continue the lease for a second 5-year period. If he opens “The North End,” it will take $950,000 of store fixtures and inventory. He believes that the two stores will have a combined profit of $395,000 a year after all the expenses of both stores have been paid. The owner’s economic analysis is based on a 5-year period. He will be able to recover $750,000 at the end of 5 years by selling the store fixtures and moving the inventory to The South End. (a) Construct a choice table for interest rates from 0% to 100%. (b) If The North End is opened, what rate of return can he expect?
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