A firm's current annual profit is $245,000

Economics Dec 17, 2020

A firm's current annual profit is $245,000. If the profit is expected to grow at an annual rate of 4.5% and the discount rate is 6%, what is the value of the firm? Round your final answer to the nearest dollar.

Group of answer choices

$17,313,333

$16,996,668

None of the answers listed is correct.

$18,241,267

$17,068,333

Expert Solution

Value of the firm= $17,313,333

Explanation

PV= Firm's current profit* ((1+ discount rate)/ discount rate- Annual rate)

= =245000*(1+6%)/(6%-4.5%)

= $ 17,313,333

Archived Solution

Unlocked Solution

You have full access to this solution. To save a copy with all formatting and attachments, use the button below.

Already a member? Sign In

Important Note: This solution is from our archive and has been purchased by others. Submitting it as-is may trigger plagiarism detection. Use it for reference only.

For ready-to-submit work, please order a fresh solution below.

Or get 100% fresh solution

Get Custom Quote