Question
You have been running a successful franchise business for the past 10 years. Your intention was to continue with the business for the next five
You have been running a successful franchise business for the past 10 years. Your intention was to continue with the business for the next five years until you reach retirement age, but you have just received an offer of purchase for the business from a fellow business owner. She has offered you R5,000,000 (five million) for your business, which can be invested in a savings account at 12% per annum, compounded monthly. If you do not sell your business it is expected to generate the following cash flows over the remaining five years:
Year (end of year) | Cash flow, R |
2017 | 1500000 |
2018 | 1500000 |
2019 | 1250000 |
2020 | 1250000 |
2021 | 100000 |
Sale value of business at the end of 2012 | 0 |
Based solely on the information given in the table above, would you retire today or rather continue to operate your business for the following five years? Show all calculations and explain your answer
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