Unexpectedly inherited a magic potions business

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Hermione and Ron have unexpectedly inherited a magic potions business from an aunt. Both are pursuing other careers and are not really interested in running the business at the moment. A direct competitor, Better Potions, has offered an immediate payment of €300,000 with two further payments of €400,000 to be made in 12 and 24 months’ time. A second potential buyer, Spells-R-Us, has always wanted to diversify in potions. On hearing of the potential sale of the business it has offered an immediate payment of €1,000,000 for the business. Ron is keen not to sell the business but to appoint a manager to run the business for them. He estimates that after additional salary costs of €30,000 per annum the business should generate €34,000 of distributable dividends annually for the foreseeable future. Prevailing annual interest rates are currently 3.25%. Advise Hermione and Ron, on purely financial considerations, whether they should keep or sell the business and, if you advise a sale, who they should sell to.

Reference no: EM13976490

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