You own a wholesale plumbing supply store. The store currently generates revenues of $1.03 million per year. Next year, revenues will either decrease by 10.3% or increase by 4.8%, with equal probability, and then stay at that level as long as you operate the store. You own the store outright. Other costs run $800,000 per year. There are no costs to shutting down in that case you can always sell the store for $450,000. What is the business worth today if the cost of capital is fixed at 10.1%? (Hint: Make sure to round all intermediate calculations to at least four decimal places.) What is the business worth today if the cost of capital is fixed at 10.1%? Today the business is worth $(Round to the nearest dollar)
You own a wholesale plumbing supply store. The store currently generates revenues of $1.03 million per year. Next year, revenues will either decrease by 10.3% or increase by 4.8%, with equal probability, and then stay at that level as long as you operate the store. You own the store outright. Other costs run $800,000 per year. There are no costs to shutting down in that case you can always sell the store for $450,000. What is the business worth today if the cost of capital is fixed at 10.1%? (Hint: Make sure to round all intermediate calculations to at least four decimal places.) What is the business worth today if the cost of capital is fixed at 10.1%? Today the business is worth $(Round to the nearest dollar)
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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Ee 276.
Transcribed Image Text:You own a wholesale plumbing supply store. The store currently generates revenues of $1.03 million per year. Next year, revenues will either decrease by 10.3% or increase by 4.8%, with equal
probability, and then stay at that level as long as you operate the store. You own the store outright. Other costs run $800,000 per year. There are no costs to shutting down; in that case you can
always sell the store for $450,000. What is the business worth today if the cost of capital is fixed at 10.1%7 (Hint: Make sure to round all intermediate calculations to at least four decimal places.)
What is the business worth today if the cost of capital is fixed at 10.1%?
Today the business is worth $(Round to the nearest dollar.)
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