Alice is buying a business and she wants to determine if the value is worth the price quoted. From the three years income statement provided to her by the business owner, she calculated the weighted average of earnings to be $50,000. To find the price, she divided the weighted average by a predetermined rate of 10% and the value was $500,000. She also used a 12% predetermine rate and ended up with a value of $416,666.67. What does the different values tell Alice? Higher predetermined rates are used for slow growth or struggling businesses Lower predetermined rates are used for well-established businesses The predetermined rate does not affect the value of the business

Alice is buying a business and she wants to determine if the value is worth the price quoted. From the three years income statement provided to her by the business owner, she calculated the weighted average of earnings to be $50,000. To find the price, she divided the weighted average by a predetermined rate of 10% and the value was $500,000. She also used a 12% predetermine rate and ended up with a value of $416,666.67 What does the different values tell Alice? Higher predetermined rates are used for slow growth or struggling businesses Lower predetermined rates are used for well-established businesses The predetermined rate does not affect the value of the business