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Taggart Transcontinental is considering adding a trucking division to expand the coverage of its existing rail lines.The trucking division will cost $1,000,000 and is expected to generate free cash flows of $100,000 for each of the next five years.Taggart Transcontinental forecasts that future free cash flows after year 5 will grow at 2% per year,forever.Taggart Transcontinental's cost of capital is 10%.
-The continuation value for the trucking division in year five is closest to:
Shortage
A condition where there's more market demand for a product or service than what is supplied.
Equilibrium Price
The rate at which the volume of goods available meets the volume of goods sought.
Surpluses
The amount by which supply exceeds demand, often referring to goods, services or public finances.
Shortages
A situation where the demand for a product or service exceeds the supply available at a specific price.
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