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Katen [24]
3 years ago
12

A firm expects to earn $10,000,000 in cash in 2018. The firm also expects to increase its cash earnings by 2% each year in perpe

tuity. Using a discount rate of 7.50%, what is the current value of this firm?
Business
1 answer:
deff fn [24]3 years ago
3 0

Answer:

$181,818,181.82

Explanation:

The computation of the current value of this firm is shown below:

= (Firm expectation to earns in cash) ÷ (discount rate - increased cash earning percentage)

= ($10,000,000) ÷ (7.5% - 2%)

= ($10,000,000) ÷ (5.5%)

= $181,818,181.82

In order to find out the current value, we considered all the given information that are mentioned in the question

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