The firm is expected to grow forever at a rate of 2 percent per year. The...
The firm is expected to grow forever at a rate of 2 percent per year. The current rate of interest is 5 percent, which is expected to remain unchanged for the foreseeable future. What is the value of the firm if it is currently earning profits of $1,000?
-
$26,500
-
$35,000
-
$31,000
-
$30,000
-
None of the options.
Homework Answers
Current profits = $ 1000
Interest rate, k = 5%
growth rate , g = 2%
Value of the firm = Profit/(k-g) = 1000/(5% - 2%) = $ 33,333.33
So Answer is None of the options
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