"You are running a hot Internet company. Analysts predict that its earnings will grow at 40% per year for the next five years. After that, as competition increases, earnings growth is expected to slow to 2% per year and continue at that level forever. Your company has just announced earnings of $5 million. What is the present value of all future earnings if the interest rate is 7%? (Assume all cash flows occur at the end of the year.)
"You are running a hot Internet company. Analysts predict that its earnings will grow at 40% per year for the next five years. After that, as competition increases, earnings growth is expected to slow to 2% per year and continue at that level forever. Your company has just announced earnings of $5 million. What is the present value of all future earnings if the interest rate is 7%? (Assume all cash flows occur at the end of the year.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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From problem 12, I can't seem to figure it out. Please assist and provide step by step on how to solve... thank you!
"You are running a hot Internet company. Analysts predict that its earnings will grow at 40% per year for the next five years. After that, as competition increases, earnings growth is expected to slow to 2% per year and continue at that level forever. Your company has just announced earnings of $5 million. What is the present value of all future earnings if the interest rate is 7%? (Assume all cash flows occur at the end of the year.)
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