Suppose you are trying to decide whether to purchase a business. You expect that you will be able to collect $4,000,000 in revenue in year 1 and you expect your revenues to increase by 6% each year though year 10. Your costs in year 1 are expected to be $2,400,000 but you expect them to increase by 3% each year thereafter. You believe that you will be able to sell the business after 10 for %24,000,000 at the end of year 10. If the rate of return on similar business is 20%, calculate the most you should be willing to pay for the business. Suppose the people who currently own the business are asking $16,000,000 for the business. Are you willing to pay this price? 

Answer rating: 100% (QA)

To calculate the most you should be willing to pay for the business we need to determine the present ... View the full answer