According to Forbes, a typical National Basketball Association (NBA) franchise would sell for $372 million—though the Knicks were worth $600 million in 2007. NBA teams posted average earnings (before interest, taxes, depreciation, and amortization) of $9.8 million. Assuming that the team can maintain this earnings flow indefinitely, does it pay for a profit-maximizing investor to buy such a franchise if the real interest rate is 3%?
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