An entrepreneur wants to purchase a particular small business. The asking price is $5 million. He expects to improve the business’s operations over a period of five years and sell it at a handsome profit. To help him achieve this goal, a wealthy aunt is willing to loan the entrepreneur $5 million for five years at 0 percent interest. Given this loan, what is the lowest rate of return the entrepreneur should be willing to accept on purchase of the business?

Why? LO.1