Question

You own a business which generates $200,000 in profit per year. Someone has offered to buy it from you. Based on a 5 year projection and a belief that you could earn 9% annually if you had the money today, how much do you believe the business is worth today?

Answer 1

Answer:

The Present worth is $777930.25

Explanation:

FInd the NPV of the cashflows

NPV = 200000/(1+0.09)^1 + 200000/(1+0.09)^2 + 200000/(1+0.09)^3 + 200000/(1+0.09)^4 + 200000/(1+0.09)^5

= $777930.25

Therefore, The Present worth is $777930.25