Suppose the growth rate of the firms profit is 7 percent the

Suppose the growth rate of the firm\'s profit is 7 percent, the interest rate is 9 percent, and the current profits of the firm are $90 million. The firm does NOT pay out dividends. What is the value of the firm? $4,905 million $613 million $405 million $90 million

PV(firm)=p(0)[(1+i)/(i-g)], where P(0)=90 million, i=.09, and g=.07.
PV(firm)=90*[(1+.09)/(.09-.07)]
PV(firm)=90*[1.09/.02]
PV(firm)=4,500*1.09
PV(firm)=4,905 million

$Suppose the growth rate of the firm\'s profit is 7 percent, the interest rate is 9 percent, and the current profits of the firm are $90 million. The firm does N$

Suppose the growth rate of the firms profit is 7 percent the

Solution

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