You own a wholesale plumbing supply store. The store currently generates revenues of $1 million per year.

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You own a wholesale plumbing supply store. The store currently generates revenues of $1 million per year. Next year, revenues will either decrease by 9.6% 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 $880,000 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 9.6%?

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Corporate Finance The Core

ISBN: 9781292158334

4th Global Edition

Authors: Jonathan Berk, Peter DeMarzo

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