Suppose the interest rate is 6 percent, theexpected growth rate of your firm is 3percent, and the firm is expected tocontinue forever. If current profits are$1,200, what is the value of the firm?a. 41,200b. 40,000c. 36,500d. 42,400

The above answer can be explained as under - Value of the firm = Current profit *(1 + growth rate)…

Answered: Suppose the interest rate is 6 percent,…

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

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Suppose the interest rate is 6 percent, the expected growth rate of your firm is 3 percent, and the firm is expected to continue forever. If current profits are $1,200, what is the value of the firm? a. 41,200 b. 40,000 c. 36,500 d. 42,400