Growth. Each dollar of profit reinvested in the good business is worth 200 cents on the dollar in business value (20 percent ÷ 10 percent = 2 times). Let’s say the good business reinvests all its $1 million in profit and keeps up its 20 percent profitability. The next year, it will earn $1.2 million on $6 million in capital. Applying the same multiple, it is worth $12 million. Last year, it was worth $10 million. The $1 million reinvested in the business is worth $2 million in business value. Next year, it will be worth $14.4 million and so on. Contrast this with the return to the owner of the
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