Suppose the discount rate is 8%, the expected growth rate of the firms profit is 5%, and the firm is expected to continue forever. If the current profit is $40,000, what is the value of the firm?
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- In how many markets do the top listed firms produce at least 96 percent of total output?A large corporation's profit objective may not be profit or wealth maximization, because stockholders have little power in corporate decision making. management is more interested in maximizing its own income. managers are overly concerned with their own survival and may not take all prudent risks. All of theseModified True or False: State whether each statement is true or false. If the statement is false, briefly explain why it is so, and then restate it to make it true. A firm that is breaking even, or earning a zero level of profit, is one that is earning exactly a normal rate of return, which implies that new investors are not attracted, but current ones are not running away either.
- The owner of a firm expects to make a profit of $12,000 for each of the next two years and to be able to sell the firm at the end of the second year for $30,000. The owner of the firm believes that the appropriate discount rate for the firm is 14 percent. Calculate the value of the firm.Based on these answers, should James continue operating the company?Describe the principal-agent problem between firm owners and managers.
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- Henry Manne notes that a policy making it easy to fight off hostile takeovers would dilute: A. The ability of new shareholders to enter the investment B. The market for corporate control C. The power of free-flowing capital D. The stock options of high-level executives E. Congressional insider tradingMost economists think that innovation is not random, and that pharmaceutical companies can steer their research toward profit opportunities.Which of the following financial ratios provides insight into a firm’s solvency over the short term by indicating its ability to cover current liabilities? (a) Acid-test ratio (b) Quick ratio (c) Current ratio (d) Net profit ratio?