Question: Sparkling Water Inc expects to sell 2 8 million bottles of
Sparkling Water, Inc., expects to sell 2.8 million bottles of drinking water each year in perpetuity. This year each bottle will sell for $1.25 in real terms and will cost $.90 in real terms. Sales income and costs occur at year-end. Revenues will rise at a real rate of 6 percent annually, while real costs will rise at a real rate of 5 percent annually. The real discount rate is 10 percent. The corporate tax rate is 34 percent. What is Sparkling worth today?
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