A Restaurant May Be Purchased for $250 000

Essay

A restaurant may be purchased for $250 000. Annual net income from the operation of the restaurant is expected to be $61 000 for each of the first 4 years and $30 000 for each of the next three years. After 7 years, the restaurant can be sold for $315 000. Determine the rate of return on the investment correct to the nearest tenth of a percent.
a) Use linear interpolation to find the approximate value of the rate of return.
b) Find the answer using Cash Flow and IRR.