Suppose the interest rate is 10 present and the firm is expected to grow at a rate

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Suppose the interest rate is 10 present and the firm is expected to grow at a rate of 5 percent for the foreseeable future. The firm’s current profits are $100.

1. What is the value of the firm (the present value of its current and future earnings)?

2. What is the value of the firm immediately after it pays a dividend equal to its current profits?

Related Book For answer-question

Fundamentals of Corporate Finance

ISBN: 978-0132148238

2nd edition

Authors: Berk, DeMarzo, Harford

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Posted Date: Jan 09, 2021 12:37 AM

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Suppose the interest rate is 10 present and the firm is expected to grow at a rate

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a Nextperiod profit P1 100 x 105 105 Fir... View the full answer

Fundamentals of Corporate Finance

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