Your brother owns a commercial electrical company. A friend of his is retiring and has offered to sell her electrical maintenance contracts to him.She has given you her speadsheets and you have estimated that you would earn a cash flow of $2098 per month after expenses.Your financial advisor has estimated that you may be able to sell the company for $480556 in 4 years. Based onthe risk of this investment, you require a return of 8.22%. What is the most you should be willing to pay for the contracts today?
Your brother owns a commercial electrical company. A friend of his is retiring and has offered to sell her electrical maintenance contracts to him.She has given you her speadsheets and you have estimated that you would earn a cash flow of $2098 per month after expenses.Your financial advisor has estimated that you may be able to sell the company for $480556 in 4 years. Based onthe risk of this investment, you require a return of 8.22%. What is the most you should be willing to pay for the contracts today?
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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Your brother owns a commercial electrical company. A friend of his is retiring and has offered to sell her electrical maintenance contracts to him.She has given you her speadsheets and you have
estimated that you would earn a cash flow of $2098 per month after expenses.Your financial advisor has estimated that you may be able to sell the company for $480556 in 4 years.
Based onthe risk of this investment, you require a return of 8.22%. What is the most you should be willing to pay for the contracts today?
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