In 1956, AT&T Laid Its First Underwater Phone Line

question 41

Multiple Choice

In 1956, AT&T laid its first underwater phone line. By 1996, AT&T Submarine Systems, the division of AT&T that installs and maintains undersea communication lines, had seven cable ships and 1000 workers. On October 5, 1996, AT&T announced that it was seeking a buyer for its Submarine Systems division. The Submarine Systems division of AT&T was posting a profit of $850 million per year. If a prospective bidder considered that over a 25-year period, profits of the division would grow by 10% per year (after which it would be obsolete) and that profits could be reinvested at an annual return of 20%, what would the prospective bidder have considered to be the 25-year present value of its Submarine Systems division? Assume a continuous stream and round your answer to the nearest billion dollars. You may use technology to calculate the answer.

• A) $4 billion
• B) $3 billion
• C) $8 billion
• D) $9 billion
• E) $126 billion

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Definitions:

Priming Study

An experimental procedure used to influence participants' subsequent thoughts and behaviors by exposing them to specific stimuli beforehand.

Laboratory B

often refers to a designated experimental or research setting in scientific studies, sometimes used in sequence with other labs (e.g., Laboratory A, Laboratory C) for comparative purposes.

Projective Data

Information obtained from techniques that involve individuals interpreting ambiguous stimuli, used in psychology to uncover unconscious thoughts or feelings.

Employee Absenteeism

The habitual non-presence of an employee at their job, which may be due to illness, personal issues, or dissatisfaction with work.