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The coffee shop has a 47-year lease, so we will assume that it will be in business for 47 years. It produced cash flows of
The coffee shop has a 47-year lease, so we will assume that it will be in business for 47 years. It produced cash flows of $394,757 after all expenses this year, and the discount rate used by similar businesses is 13.4 percent. You estimate that, over the long term, cash flows will grow at 3.2 percent per year because of inflation. Your boss wants to know how much it is worth now.
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