Suppose the Interest Rate Is 5 Percent,the Expected Growth Rate

question 102

Multiple Choice

Suppose the interest rate is 5 percent,the expected growth rate of the firm is 2 percent,and the firm is expected to continue forever.If current profits are $1,000,what is the value of the firm?

• A) $31,000
• B) $30,000
• C) $26,500
• D) $35,000

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Definitions:

Economies of Scale

Cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale.

Trade Gains

Benefits that countries obtain from engaging in international trade, such as increased variety of goods and specialization in production.

International Trade

International trade involves the exchange of goods and services across international borders or territories, enabling countries to expand markets and pursue economies of scale.

Variety

In economics, it represents the assortment or range of different products, services, or goods available in a market.