Please answer question C

Please answer question C

Please answer question C

Do =$50,500. Required rate of return =15%. a. What is the firm's value if cash flows are expected to grow at an annual rate of 0% from now until infinity? b. What is the firm's value if cash flows are expected to grow at a constant annual rate of 5% from now until infinity? c. What is the firm's value if cash flows are expected to grow at an annual rate of 10% for the first 2 years, followed by a constant rate of 5% from year 3 to infinity? To find the value of the firm in these three cases, we can use the formula for the present value of a perpetuity: Present value = cash flow / required rate of return a. If cash flows are expected to grow at an annual rate of 0% from now until infinity, the present value of the firm is: Presentvalue=1550,000%=333,333.33 Explanation In this case, the cash flow is the expected cash flow for each year. b. Present value = cash flow / (required rate of return - growth rate) Plugging in the values we have: Presentvalue=15%5%50,500=505,000.00 Explanation If cash flows are expected to grow at a constant annual rate of 5% from now until infinity, we can use the formula for the present value of an infinite geometric series to find the present value of the firm