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Suppose you start a new business, which operates for 3 years, at which point you plan to sell the business to a larger company. Your cash flow in year 3 is $10 million and you believe this cash flow will continue to grow at 3% per year. If your discount rate is 10% per year compounded yearly, what is the present value of the business in year 3? Hint: This value is the "terminal value."

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Financial Management, Finance

Category:- Financial Management
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