Question: Five years ago your firm installed a quick-lube store on Connolly avenue. Southwest cellular would like your store to convert to one of its own outlets. They have made you an offer that nets you $600,000 after taxes. Your required return is 12%.
1) You expect $ 75,000 cash flow after tax for the next 10 years. Should you abandon?
2) Assume your annual cash flow is $120,000. What is the minimum offer you would accept?