You are trying to assess the value of a small retail store that is up for...

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You are trying to assess the value of a small retail store that is up for sale. The store generated a cash flow to its owner of $ 100,000 in the most year of operation, and is expected to have growth of about 5% a year in perpetuity. a- If the rate of return required on this store is 10%, what would your assessment be of the value of the store? b- What would the growth rate need to be to justify a price of $2.5 million for this store? You are trying to assess the value of a small retail store that is up for sale. The store generated a cash flow to its owner of $ 100,000 in the most year of operation, and is expected to have growth of about 5% a year in perpetuity. a- If the rate of return required on this store is 10%, what would your assessment be of the value of the store? b- What would the growth rate need to be to justify a price of $2.5 million for this store?

Answer rating: 100% (QA)

a To assess the value of the store we can use the Gordon Growth Model also known as the dividend dis... View the full answer