You own a wholesale plumbing supply store. The store currently generates revenues of $1.01 million...
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You own a wholesale plumbing supply store. The store currently generates revenues of $1.01 million per year. Next year, revenues will either decrease by 9.7% 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 per year $880,000. There are no costs to shutting down; in that case you can always sell the store for $540,000 . What is the business worth today if the cost of capital is fixed at 9.6%(Hint: Make sure to round all intermediate calculations to at least four decimal places.)
What is the business worth today if the cost of capital is fixed at 9.6%?
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