Mixtastic, a firm that sells a subscription for a mix-at-home cocktail kit, projects it will earn $100K in profit each year, and each year it has an 80% chance of surviving until the next year. Under these assumptions, what is the value of the firm today? In case the firm only expects to start earning profit in three years, then approximately by what percentage does its present value decrease?

Answer rating: 100% (QA)

The value of the firm today also known as the present value PV can be calculated by summing the discounted cash flows it expects to receive in the fut... View the full answer