Ray's Jams Inc

question 1

Multiple Choice

Ray's Jams Inc.was just established with an investment of $5 million into stereo equipment.Ray expects his company to generate $800,000 a year for the next 200 years.If Ray's cost of capital is 15%, find the market value and book value of his company.(Use values in millions)

• A)Market value = $9.0 million; book value = $5.0 million
• B)Market value = $5.0 million; book value = $5.3 million
• C)Market value = $5.33 million; book value = $5.0 million
• D)Market value = $7.0 million; book value = $5.0 million

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