Please follow the instructions provided exactly. The previous order had several errors and misspellings.
Once you review the model, you should have the following takeaways:
The terminal value (the present value of ALL future cash flows after a given year) is crucial to the value of any enterprise. In our case, it is the present value from year 6 on.
The terminal value itself is heavily influenced by the long-term growth rate assumed. In our case, we assume a 0% growth but a more realistic growth rate should be 3%. Go to the model and change cell C11 to 3% and see how the value of the business takes off.
The discount rate (the percent used to discount cash flows) is the opportunity cost of capital for the investor. The opportunity cost is the return the investor can make in other investments.
It appears that the price for the route is too low. It is not because Mr. Araujo is not smart; he is. Its just that the buyers that he found dont have that much money (that is, liquidity) to buy the business. So, he has to sell it for what he can get.
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