You have recently learned that the company where you work is being sold for $500,000. The company's income statement indicates current profits of $15,000, which has yet to be paid out as dividends. If the company is a 'going concern' indefinitely and profits are assumed to grow at a rate of 3%, what is the assumed opportunity cost of funds?

You have recently learned that the company where you work is being sold for $500,000. The company's income statement indicates current profits of $15,000, which has yet to be paid out as dividends. If the company is a 'going concern' indefinitely and profits are assumed to grow at a rate of 3%, what is the assumed opportunity cost of funds?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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You have recently learned that the company where you work is being sold for $500,000. The company’s income statement indicates current profits of $15,000, which has yet to be paid out as dividends. If the company is a 'going concern' indefinitely and profits are assumed to grow at a rate of 3%, what is the assumed opportunity cost of funds?

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