Suppose that the Hambros in the Tuman Bay is for sale. You have gathered the following pertinent
Question:
Suppose that the Hambros in the Tuman Bay is for sale. You have gathered the following pertinent facts: (i) the property (i.e., the land and building) is worth $500,000, the equipment and furniture are worth $100,000, its short-term assets (e.g., the inventory and supply) are $30,000, (ii) its short-term liabilities are $30,000 and it has no long-term liabilities, and (iii) the latest annual net income is $100,000.
You estimate that the annual growth rate of net income will be 5% for perpetuity with the probability of 0.2, 3% with the probability of 0.7, and -2% with the probability of 0.1. The opportunity cost of your capital is 10% per annum.
What is the value of the Hambros to you given the information ? Please explain how you would determine the value?
Introduction To Federal Income Taxation In Canada
ISBN: 9781554965021
33rd Edition
Authors: Robert E. Beam, Stanley N. Laiken, James J. Barnett