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

---

Definitions:

Purchaser Supplies

Materials or goods procured by the buyer directly for use in a service or production process.

Benefit

An advantage, privilege, or financial aid that is granted to an individual or group, often from an employer, government, or institution.

Sale of Goods Act

Legislation governing the sale of goods, ensuring that goods sold meet certain quality and ownership criteria.

Title and Possession

Legal terms that refer to the ownership (title) of an asset and the control or occupation of it (possession).