Q5. Ritesh currently works at a software company WalTech. He is 4 years from retirement....
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Q5. Ritesh currently works at a software company WalTech. He is 4 years from retirement. His annual salary is 65,00,000 per year, and his salary is expected to increase at 3% per year until his retirement. The required rate (inflation rate) is expected to be 4%. However, Ritesh has been thinking of retiring early. He always wanted to become an entrepreneur by investing in a business. Ritesh estimates that if he invests in a business, it will generate 18,00,000 in third year and shall grow at 4% per annum in perpetuity. Looking at the risk in the business the required rate of return should be 9%. Ritesh can either do his job or invest as well as manage the business. Assume the salary and business income to be tax-free. Does it make financial sense for Ritesh to quit his job and become an entrepreneur? Justify your answers with calculations
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