A business is for sale at $100 000. Discounting the expected cash inflows and expected cash outflows (except the purchase price) at 12% yields an amount of $94 741. Based on this information:

Question

Quizplus · Accepted Answer

The net present value (NPV) of the expected cash flows, excluding the purchase price, is $94,741 when discounted at 12%. This means that paying $100,000 for the business would result in a negative NPV, indicating that the investment would not meet the required 12% return, hence it should be rejected if a 12% return is required.

A Business Is for Sale at $100 000