Question

If the new business will last only for the next five years, so she can take the profits from the new business for five times starting from one year from now, what is the size of the value of the new business for Janet

Answer 1

Based on the profits of the new business, the size of the value of the new business would be $282,860.

What would be the value of the new business?

The new business is said to make a profit of $100,000 every year and the interest rate is 3%.

The value of the new business is therefore:
= Amount x Present value interest factor of an annuity, 5 years, 3%
= 100,000 x 2.8286

= $282,860

In conclusion, the value would be  $282,860.

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