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What is the price that the buyer should pay for bike shop

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Reference no: EM131063118

A prospective buyer has hired you to value a bike shop. you estimate that in the next 4 years, bike shop will generate free cash flows of $10,000, $14,000, $18,000 and $21,000. After that, you expect that cash flows to grow by 5% indefinitely. The discount rate is 12%. Regardless of what answer you find, assume that the terminal value for the bike shop is $250,000. What is the price that the buyer should pay for the bike shop. (round to the nearest thousands of dollars).

A.$210,000

B.$250,000

C.$313,000

D.$205,000

E.$305,000

Reference no: EM131063118

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