Jay's Jams Inc

question 107

Multiple Choice

Jay's Jams Inc. was just established with an investment of $5 million in stereo equipment. Jay expects his company to generate $800,000 a year for the next 10 years, followed by $1 million a year for the following 10 years. If Jay'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 = $5.3 million; book value = $5.0 million
• D)Market value = $18.0 million; book value = $5.0 million

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