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What price should you pay for Revive Consulting Limited

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Reference no: EM133065315

Question - You are considering the purchase of a small business, Revive Consulting Limited. This company currently earns after-tax cash flow of $350,000 per year. On the basis of a review of similar risk investment opportunities, you must earn a 11% rate of return on the proposed purchase. What price should you pay for Revive Consulting Limited if the after-tax cash flows are expected to grow at an annual rate of 5% for the first two years, followed by a constant annual rate of 8% from year 3 onwards?

Reference no: EM133065315

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