ou are running a hot Internet company. Analysts predict that its earnings will grow at 30% per year for the next five years (i.e., Year 1 to Year 5). After that, as competition increases, earnings growth is expected to slow to 4% per year and continue at that level forever. Your company has just announced earnings of $4 million. What is the present value of all future earnings if the interest rate is 7% ?

ou are running a hot Internet company. Analysts predict that its earnings will grow at 30% per year for the next five years (i.e., Year 1 to Year 5). After that, as competition increases, earnings growth is expected to slow to 4% per year and continue at that level forever. Your company has just announced earnings of $4 million. What is the present value of all future earnings if the interest rate is 7% ?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 22P

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