Scenario: You are planning to sell your business, a Korean BBQ restaurant in Bellevue. You are forecasting sales and creating an NPV model to obtain a valuation of the business - the price you hope to sell the business at. Based on your most recent year, you forecast Year 1 sales at $ 300,000. Your historical Operating Margin (EBIT Margin) has been 30%, which gives a Year 1 Cash Flow in your model of $ 90,000. You decide to convince the potential buyer there is an opportunity for them to decrease Operating Expenses and so increase the Operating Margin. You apply an EBIT Margin of 35% in the model, giving an increased Year 1 Cash Flow of $ 105,000.

What effect does that have?

The NPV increases

The NPV is decreases

None of the above

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