Sparkling Water, Incorporated, expects to sell 3.7 million bottles of drinking water each year in perpetuity. This year each bottle will sell for $1.46 in real terms and will cost $.82 in real terms. Sales income and costs occur at year-end. Revenues will rise at a real rate of 1.7 percent annually, while real costs will rise at a real rate of .8 percent annually. The real discount rate is 5 percent. The corporate tax rate is 25 percent. What is the company worth today? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) Value of the firm
Sparkling Water, Incorporated, expects to sell 3.7 million bottles of drinking water each year in perpetuity. This year each bottle will sell for $1.46 in real terms and will cost $.82 in real terms. Sales income and costs occur at year-end. Revenues will rise at a real rate of 1.7 percent annually, while real costs will rise at a real rate of .8 percent annually. The real discount rate is 5 percent. The corporate tax rate is 25 percent. What is the company worth today? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) Value of the firm
Chapter13: Other Financing Alternatives
Section: Chapter Questions
Problem 1bM
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