The day you started studying at Monash University Malaysia, you fell in love with The Mad Alchemy (the coffee shop next to the library). After a while, you started thinking about how nice it would be if you owned it. Being a coffee lover, you apply for a job at The Mad Alchemy (TMA), and you get it. After working for some time, you realize that you like your job very much and that the shop is doing pretty well. Your desire to own this shop grows even more. As an employee, somehow, you get close to the owner, Mr. Reza, and find out that he is a bit tired of running TMA and that he wants to sell the business. You tell him that you are interested, but currently, you don't have enough funds to buy it from him. Instead, you propose to him that you would like to buy it from him in five years once you save enough funds. Mr. Reza generally agrees to your proposal, but with one condition. He wants you to continue working and run TMA for him so that he can take some time off, and in return, he promises to continue paying you the same monthly salary before every month and give you 20% of the annual profit after tax that TMA makes at the end of each year. As you agree to this deal in general, you find out that the business has been making RM150,000 of profit after tax for the last five years. Both of you agree that the shop will continue to earn the same amount indefinitely. Mr. Reza thinks that TMA is worth RM1 million but is willing to sell it to you for RM850,000 in five years if you accept his offer to work and run the business for him. You tell him that you appreciate his offer and that you need to consult your parents and friends and evaluate your finances to see whether you will have enough money or not to purchase the shop from him.

1. If the discount rate to evaluate such businesses is 16.5%, would you buy TMA for RM850,000 if you had the money? Why or why not?