Assume that fast-food restaurants generally provide an ROI of 12%, but that such a restaurant near a college campus has an ROI of 15% because its relatively large volume of business generates an above-average turnover (sales/assets). The replacement value of the restaurant’s plant and equipment is $600,000. If you were to invest that amount in a restaurant elsewhere in town, you could expect a 12% ROI.
What is the maximum price you would be willing to pay for the business?