You own a wholesale plumbing supply store. The store currently generates revenues of

$1.04

million per year. Next year, revenues will either decrease by

9.9%

or increase by

5.4%,

with equal probability, and then stay at that level as long as you operate the store. You own the store outright. Other costs run

$890,000

per year. There are no costs to shutting down; in that case you can always sell the store for

$520,000.

What is the business worth today if the cost of capital is fixed at

10.5%?

(Hint:

Make sure to round all intermediate calculations to at least four decimal

places.)

Question content area bottom

Part 1

What is the business worth today if the cost of capital is fixed at

10.5%?

Today the business is worth

$enter your response here.

(Round to the nearest dollar.)