Question
Suppose that the Hambros in the Tuman Bay is for sale. You have gathered the following pertinent facts: (i) the property (i.e., the land and
Suppose that the Hambros in the Tuman Bay is for sale. You have gathered the following pertinent facts: (i) the property (i.e., the land and building) is worth $500,000, the equipment and furniture are worth $100,000, its short-term assets (e.g., the inventory and supply) are $30,000, (ii) its short-term liabilities are $30,000 and it has no long-term liabilities, and (iii) the latest annual net income is $100,000.
You estimate that the annual growth rate of net income will be 5% for perpetuity with the probability of 0.2, 3% with the probability of 0.7, and -2% with the probability of 0.1. The opportunity cost of your capital is 10% per annum.
What is the value of the Hambros to you given the information ? Please explain how you would determine the value?
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Answer To determine the value of the Hambros we will use the discounted cash flow DCF approach which involves estimating the future cash flows generat...Get Instant Access to Expert-Tailored Solutions
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