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Suppose that the business you own would give you an annual income of $20,000, forever. The best use of capital you have is expected to
Suppose that the business you own would give you an annual income of $20,000, forever. The best use of capital you have is expected to generate a return equivalent to 5% of the capital invested a year.
(i) At what price would you sell you business today?
(ii) If the annual income $20,000 is expected to grow at 3% a year, at what price would you sell the business today?
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