From the course: Finance Foundations: Business Valuation
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Cash flows, timing, and risk
From the course: Finance Foundations: Business Valuation
Cash flows, timing, and risk
- Let's say that our mutual friend has asked me or you to become a partner in an online retail business. This online retail business takes online orders from customers and then arranges shipment of the goods by various suppliers. The major cash outflows for this business are the compensation for the employees and the cost of the physical assets, the servers, the regular computers, and the office costs, rent, utilities, insurance. The major cash inflows for this business is the commission fees received from the suppliers who pay the online retailer for attracting the buyers online. So our friend has asked me to become a partner by investing a $100,000 of my hard-earned cash into this business. Well, with my $100,000 investment, will I now be a 5% owner, a 20% owner, a 75% owner? Of course, it depends on what the business is worth. So before investing my money in our friend's business, I need to value the business. Now…
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