Question: The NPV is an all important calculation. It takes the projected future cash flows, in this case from a small business, and equates it to a value today for the company. This allows "side by side" comparisons for an investor today looking to buy a business with future projected profitability. When the discount rate increases, the present value declines. A higher discount rate indicates greater risk. Consider buying a single McDonalds restaurant versus an unknown burger chain outlet that produces similar profits. The McDonalds is a very well known brand with a long history and good support for its franchisees. The unknown burger outlet is just that - unknown. Most rational investors would be willing to pay more for the McDonalds because it has been around for so long and is thus perceived to have lower risk, and thus a lower discount rate and higher NPV. Can you think of other factors of a small business purchase that would raise the discount rate?

This is only a discussion question. Min 50 words.