You read the classified ads in your newspaper and found a company for sale. The asking price was $400,000. However, you further read that the company was in legal trouble with the government and would require you to spend approximately $250,000 (legal fee) after tax to bring the company “on line” (or back to life). The company would be expected to generate after tax cash flows of $120,000 after tax a year. With required rate of return of 20%, is it a good buy if the:
The business was exptected to have a 15 year life?
the business was expected to last forever?