Small Co. is for sale. The company has recognized $50,000 in profits every year since it began three years ago. The industry has a capitalization rate of 25%. What is the value of Small Co.?

Question

Quizplus · Accepted Answer

To calculate the value of Small Co., we need to use the formula V = P / R, where V is the value of the company, P is the annual profit, and R is the capitalization rate. Plugging in the numbers, we get V = 50,000 / 0.25 = 200,000. Therefore, the value of Small Co. is $200,000.

Small Co Is for Sale