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B. You work for Absa as an Analyst and you were approached by your private banker Mr. Ferguson to assist establish the value of his
B. You work for Absa as an Analyst and you were approached by your private banker Mr. Ferguson to assist establish the value of his business. He expects his company to generate net cash flows of $5, 000,000 in the first year and $2,000,000 for each of the next five years. The company can be sold for $10,000,000 seven years from now. Comparable investments in the market earn 10 percent compounded annually. i) Determine how much Mr. Ferguson's company is worth. (10 marks) ii) Mr. Ferguson offers to sell the company to you for P12 000000 . Determine whether you will accept or reject the offer
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