The store currently generates revenues of $1.04 million per year next year revenues will either decrease by 10.3% or increase by 5.4% with equal probability and then stay at that level as long as you operate the store you own the store outright other costs run $890,000 per year. There are no costs to shutting down in that case. You can always sell the store for $510,000. What is the business worth today if the cost of capital is fixed at 10.5 % ?
The store currently generates revenues of $1.04 million per year next year revenues will either decrease by 10.3% or increase by 5.4% with equal probability and then stay at that level as long as you operate the store you own the store outright other costs run $890,000 per year. There are no costs to shutting down in that case. You can always sell the store for $510,000. What is the business worth today if the cost of capital is fixed at 10.5 % ?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:The store currently generates revenues of $1.04 million per year next year revenues will either
decrease by 10.3% or increase by 5.4% with equal probability and then stay at that level as
long as you operate the store you own the store outright other costs run $890,000 per year.
There are no costs to shutting down in that case. You can always sell the store for $510,000.
What is the business worth today if the cost of capital is fixed at 10.5 % ?
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