Ray's Jams Inc

question 11

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.

• 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 Book Value = $5 million
• Market Value = $800,000(200 year annuity factor)
• = 800,000/15%

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Definitions:

Gross National Product

The total value of goods produced and services provided by a country during one year, including the net income from foreign investments.

National Income

The total amount of money earned within a country from the production of goods and services in a given time period.

Corporate Profits Taxes

Taxes levied on the earnings after expenses and deductions of corporations, similar to corporate income tax but emphasizing the taxation on net profits.

Ronald McDonald's House

Programs providing a home away from home for families so they can stay close by their hospitalized child at little to no cost.