Question
Gerry is considering buying a small business that makes t-shirts. He plans on running the business for 17 years before selling it. He expects to
Gerry is considering buying a small business that makes t-shirts. He plans on running the business for 17 years before selling it. He expects to make $22,141 each semiannual period for the 17 years that he owns the business with his first $22,141 realized at the end of the first semiannual period. He has also contracted with 3 large events to make t-shirts that will generate cash flows of $19,647, $23,331, and $13,316 in 7 years, 9 years and 14 years respectively. At the end of year 17 he plans to sell the business of $187,093 after collecting the $22,141 in annual revenue. How much should he pay for the business if the interest rate is currently 10.4%
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