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You own a supply store. The store currently generates revenues of $100 000 per year. Next year, revenues will either decrease by 20% or increase
You own a supply store. The store currently generates revenues of $100 000 per year. Next year, revenues will either decrease by 20% or increase by 10%, with equal probability, and then stay at that level as long as you operate the store. You own the store outright. Other costs run $50 000 per year. There are no costs for shutting down; in that case, you can always sell the store for $50 000. What is the business worth today if the cost of capital is fixed at 15%?
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