Question

Business is growing with sales increasing by 50% per year. The owner decides to sell while the business is hot and has set the sale price as half the value of the estimated sales for the next 5 years. This year, sales will be 1,456,988. Using a geometric gradient, determine the selling price if interest is 5%.

Answer 1

Hi

Please see the below table. Used the discounting formula to calculate PV. PV = Sales/(1+0.05)^n

Year	Sales	PV at r= 5%
0	14,56,988
1	21,85,482	20,81,411.43
2	32,78,223	29,73,444.90
3	49,17,335	42,47,778.43
4	73,76,002	60,68,254.89
5	1,10,64,003	86,68,935.56
	Total PV	2,40,39,825.21
	Selling Price	1,20,19,912.60