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Charlie is considering the purchase of a laundry business, but does not know how much it is worth. The business generates $18,000 in profit per
- Charlie is considering the purchase of a laundry business, but does not know how much it is worth. The business generates $18,000 in profit per year and will not require any of Charlie's time to operate. Charlie plans to buy the business, for 10 years, and then sell it for the same price he pays for. If the appropriate discount rate is 18%, what is the most Charlie should pay for the business?
(3 Marks)
- Refer to the information in Problem 1. If the discount rate falls to 9% at the end of 10 years, what will happen to the price at which Charlie can sell the business?
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Investment Analysis And Portfolio Management
Authors: Frank K. Reilly, Keith C. Brown
6th Edition
003025809X, 978-3540014386
