# Suppose the growth rate of the firm’s profit is 5 percent, the interest rate is 6 percent, and the current profits of the firm are

Question

Suppose the growth rate of the firm’s profit is 5 percent, the interest rate is 6 percent, and the current profits of the firm are \$80 million. what is the value of the firm?

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1 month 2022-12-26T19:25:23+00:00 1 Answer 0 views 0

1. The calculate value of the firm is the  growth rate of the firm’s profit is 5 percent, the interest rate is 6 percent, and the current profits of the firm are \$80 million = 8480 million

### How to solve for the value of the firm

(1+r/r -p) * P
This can be substituted in the equation
1.06/ ( 0.06 – 0.05) * 80 million = 8480 million
Hence the value of the firm is given as  8,480 million dollars. The correct answer is C.
Suppose the growth rate of the firm’s profit is 5 percent, the interest rate is 6 percent, and the current profits of the firm are \$80 million, the value of the firm is 8480 million
Complete question
Suppose the growth rate of the firm’s profit is 5 percent, the interest rate is 6 percent, and the current profits of the firm are \$80 million. What is the value of the firm?
A. \$89.2 million
B. \$1,413.3 million
C. \$8,480 million
D. None of the statements associated with this question are correct.
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