Question
You own a wholesale plumbing supply store. The store currently generates revenues of $1.03 million per year. Nextyear, revenues will either decrease by 9.7 %
You own a wholesale plumbing supply store. The store currently generates revenues of $1.03 million per year. Nextyear, revenues will either decrease by 9.7 % or increase by 4.6 % with equalprobability, and then stay at that level as long as you operate the store. You own the store outright. Other costs run $ 880,000. There are no costs to shuttingdown; in that case you can always sell the store for $550,000. What is the business worth today if the cost of capital is fixed at 10.1%?(Hint: Make sure to round all intermediate calculations to at least four decimal places.)
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