Question
The CFO of the company you work for has asked you to lead a team that is charged with determining how much your company should
The CFO of the company you work for has asked you to lead a team that is charged with determining how much your company should offer as a purchase price for a small, profitable competitor. The competitor has had positive net cash flows of approximately $1,275,000 for each of the last few years. Your CFO believes this cash flow stream will increase over the next 10 years by 5% each year, beginning next year. The company applies a 15% discount rate on similar decisions. REQUIRED: Calculate a value of the competitor and hence a recommended purchase price.
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