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Fantom [35]
3 years ago
15

A firm's current profits are $400,000. These profits are expected to grow indefinitely at a constant annual rate of 4 percent. I

f the firm's opportunity cost of funds is 6 percent, determine the value of the firm: Instructions: Enter your responses rounded to one decimal place. a. The instant before it pays out current profits as dividends. $ million b. The instant after it pays out current profits as dividends. $ million
Business
1 answer:
Valentin [98]3 years ago
3 0

Answer:

A. $21,200,000

B. $20,800,000

Explanation:

A. Calculation to determine The instant before it pays out current profits as dividends

Value of the firm =[(Current profits) × (1 +Opportunity cost of funds)} ÷ (Opportunity cost of funds - Constant growth annual rate)

Let plug in the formula

Value of the firm= [($400,000) × (1 + 0.06)]÷ (0.06 - 0.04)

Value of the firm= [($400,000) × (1.06)]÷0.02

Value of the firm= $424,000 ÷ 0.02

Value of the firm= $21,200,000

Therefore The instant before it pays out current profits as dividends will be $21,200,000

B. Calculation to determine The instant after it pays out current profits as dividends

Using this formula

Value of the firm =[(Current profits) × (1 +Constant growth annual rate)} ÷ (Opportunity cost of funds - Constant growth annual rate)

Let plug in the formula

Value of the firm= [($400,000) × (1 + 0.04)] ÷ (0.06 - 0.04)

Value of the firm= [($400,000) × (1.04)] ÷ (0.06 - 0.04)

Value of the firm= $416,000 ÷ 0.02

Value of the firm= $20,800,000

Therefore The instant after it pays out current profits as dividends will be $20,800,000

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Manuel Rios wishes to determine how long it will take an initial deposit of ​$13 comma 000 to double. a. If Manuel earns 9​% ann
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Answer:

See Below

Explanation:

This is a problem of compound interest. The formula is:

F=P(1+r)^t

Where

F is the future value

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t is the time in years

P = 13,000

To double his money, that means, F = 26,000

a)

Now, r = 9% = 0.09, so time it takes:

F=P(1+r)^t\\26,000=13,000(1+0.09)^t\\2=1.09^{t}\\t=\frac{Ln(2)}{Ln(1.09)}\\t=8.04

So, its gonna take about 8.04 years to double

b)

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F=P(1+r)^t\\2=1.06^t\\t=11.9

So, its gonna take about 11.9 years to double

c)

Here, the r is 11% or 0.11

So, the time it will take:

F=P(1+r)^t\\2 = 1.11^t\\t=6.6

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d)

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As an it professional you may support databases, but not do any application coding, why do you think it is still important to un
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3 years ago
Consider an imaginary economy that has been growing at a rate of 6% per year. Government economists have proposed a number of po
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Answer:

11.67 years

Explanation:

The rule of 70 requires that in determining when the economy growth rate will double its current growth rate, the appropriate thing to do is divide 70 by the current growth rate of 6% per year.

The economy's growth rate of 6%  has its percentage ignored when the calculation is carried out.

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Gross Domestic Product Title: Grantham Copyright - Description: Grantham Copyright 2018Use the data chart to answer the question
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Answer:

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4.  $ 600

Explanation:

1. Using the data  GDP = C+I+G+ (X-M)

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3. PCE=  Consumption+ Private Domestic Investment= $ 500 + $ 100= $ 600

4. GDP 2017= $ 750 *80%=  $ 600

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