Sparkling Water Inc. sells 4.6 million bottles of drinking water each year. Each bottle sells for $2,

Question:

Sparkling Water Inc. sells 4.6 million bottles of drinking water each year. Each bottle sells for $2, and costs per bottle are $0.45. Sales income and costs occur at year-end. Sales income is expected to rise at 6 percent annually, while costs are expected to rise at 4 percent annually. The relevant discount rate is 12 percent. The corporate tax rate is 34 percent. What is sparkling worth today?

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...