Sparkling Water Ltd, expects to sell 8 million bottles of drinking water each year in perpetuity. This year each bottle will sell for 3.25 cedis in real terms and will cost 1.80 cedis in real terms. Sales income and costs occur at year end. Revenues will rise at real rate of 10% annually, while real costs will rise at real rate of 10% annually. The real discount rate is 20%. The corporate tax rate is 25%. What is Sparkling worth today.
Sparkling Water Ltd, expects to sell 8 million bottles of drinking water each year in perpetuity. This year each bottle will sell for 3.25 cedis in real terms and will cost 1.80 cedis in real terms. Sales income and costs occur at year end. Revenues will rise at real rate of 10% annually, while real costs will rise at real rate of 10% annually. The real discount rate is 20%. The corporate tax rate is 25%. What is Sparkling worth today.
Chapter13: Other Financing Alternatives
Section: Chapter Questions
Problem 1bM
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Sparkling Water Ltd, expects to sell 8 million bottles of drinking water each year in
perpetuity. This year each bottle will sell for 3.25 cedis in real terms and will cost 1.80 cedis
in real terms. Sales income and costs occur at year end. Revenues will rise at real rate of 10%
annually, while real costs will rise at real rate of 10% annually. The real discount rate is 20%.
The corporate tax rate is 25%. What is Sparkling worth today.
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