Question

Sports current annual profits are $50,000. If they anticipated 3%growth rate in profits and long-term interest...

Sports current annual profits are $50,000. If they anticipated 3%growth rate in profits and long-term interest rate of 6%, estimate the PRESENT VALUE Of the firm.

Homework Answers

Answer #1

Annual Profit = 50,000

g = 3%

k = 6%

Present value of firm = Profit * (1 + g) / (K - g)

                                                = 50,000 * (1 + 0.03) / (0.06 - 0.03)

                                                =$1,716,666.67

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