Star Buck's wanted to open up a few coffee shops around San Antonio.
Each location costs $450,000
They plan to start 1 at the beginning of year 1, 2 locations at the end of year 2, and 3 more at the end of year 3 to spread out the work.
Each location brings in profits of $324,000 per year
They plan to sell everything in 5 years and thinks they could sell them for $67,000 each at that time.
Assume a discount rate of 9%.
Assume each location depreciates $90,000 per year.
What would the business be worth today using the Abnormal Earnings Model?