A firm has a project returning $1,000 a year in perpetuity (i.e., forever). Assume the market rate

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A firm has a project returning $1,000 a year in perpetuity (i.e., forever). Assume the market rate of interest is 5 percent.

a. What is the present value (PV) of the returns from this project?

b. What is the maximum cost the firm will bear to build this project?

c. If the project cost $5,000, what will happen to the firm’s value?

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Economics Barrons Business Review Series

ISBN: 9781438008776

6th Edition

Authors: Walter J. Wessels

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Question Posted: Feb 18, 2024 04:01 AM

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A firm has a project returning $1,000 a year in perpetuity (i.e., forever). Assume the market rate

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a 20000 b 20000 c It will go up 15000 Fo...View the full answer

Economics Barrons Business Review Series

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