Question $20$

$1$ pts

Your lemonade stand located close to the university is expected to generate $$25,000$ next year, and cash flows will grow by $5\%$ each subsequent year indefinitely. The required rate of return is $10\%,$ and ROIC is $20\%.$ After a few years of doing this business, you were able to more efficiently convert investments into profits, which increases your ROIC from $20\%$ to $25\%.$ You reinvest the same percentage in the business.

How does it affect the value of your lemonade stand?

increased by $$125,000$

increased by $$5,000$

decreased by $$125,000$

decreased by $$25,000$