A firm's current profits are $950,000. These profits are expected to grow indefinitely at a constant...
A firm's current profits are $950,000. These profits are expected to grow indefinitely at a constant annual rate of 6 percent. If the firm's opportunity cost of funds is 8 percent, determine the value of the firm: Instructions: Enter your responses rounded to two decimal places. a. The instant before it pays out current profits as dividends. $ million b. The instant after it pays out current profits as dividends. $ million
Homework Answers
1)
determine the value of the firm the instant before it pays out current profits as dividends
=950000*(1+8%)/(8%-6%)
=51300000 or 51.30 million
2)
determine the value of the firm the instant after it pays out current profits as dividends
=950000*(1+6%)/(8%-6%)
=50350000 or 50.35 million
the above is answer..
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