Answer:
Option A- 4. Price discrimination
Option B - 1. Loss leader pricing
Option C - 2. Bait and Swtich
Option D - 3. Predatory pricing
Explanation:
Price discrimination is a form of unethical pricing strategy by the producer or supplier to attract consumers whereby similar commodities are traded at varying prices to different customers by the same producer. Hence, the perfect illustration is option A
Loss Leader Pricing is another form of unethical pricing technique whereby a commodity is sold or advertised by a producer promotes other sales of more high yield commodities. Hence, the best illustration is option B.
Bait and Switch is a form of illegal pricing strategy whereby the producer promotes commodities of lower cost to greater quality ratio, however, it is such a product tends to be elusive one potential buyer's approach. The perfect example is option C
Predatory pricing is an unethical pricing technique whereby the producer intentionally priced commodities produced such that other customers are unable to compete. The perfect example is option D.
You are considering a stock investment in one of two firms (Lots of Debt, Inc. and Lots of Equity, Inc.), both of which operate in the same industry. Lots of Debt, Inc. finances its $34.25 million in assets with $32.25 million in debt and $2.00 million in equity. Lots of Equity, Inc. finances its $34.25 million in assets with $2.00 million in debt and $32.25 million in equity. Calculate the debt ratio. (Round your answers to 2 decimal places.) Calculate the equity multiplier. (Round your answers to 2 decimal places.)
Answer:
Debt Ratio = Total Debt Total/ Assets
Equity Multiplier = Assets/Equity
Lots of DebtDebt Ratio
= 32.5/34.25
= 0.95
Equity Multiplier
= 34.25/2
= 17.13
Lots of EquityDebt Ratio
= 2/34.25
= 0.06
Equity Multiplier
= 34.25/32.25
= 1.06
During the month of July, the company had the following activities: Issued 4,500 shares of common stock for $450,000 cash. Borrowed $38,500 cash from a local bank, payable in two years. Bought a building for $201,500; paid $53,500 in cash and signed a three-year note for the balance. Paid cash for equipment that cost $247,000. Purchased supplies for $10,600 on account. Prepare a classified balance sheet at July 31.
Answer:
classified balance sheet at July 31.
Assets
Non-Current Assets
Building $201,500
Equipment $247,000
Total Non-Current Assets $448,500
Current Assets
Supplies $10,600
Cash ($450,000 + $38,500 - $53,500 - $247,000) $188,000
Total Current Assets $198,600
Total Assets $647,100
Equity and Liabilities
Equity
Common Stock $450,000
Total Equity $450,000
Liabilities
Current Liabilities
Account Payable $10,600
Total Non Current Liabilities $10,600
Non-Current Liabilities
Note Payable ($38,500 + $148,000) $186,500
Total Non Current Liabilities $186,500
Total Liabilities $197,100
Total Equity and Liabilities $647,100
Explanation:
A Balance Sheet is a Financial Statement report that shows the Assets, Liability and Equity balances as at the end of the Reporting period.
Fred wants to take out a loan. He can afford to make monthly payments of 100 dollars and wants to pay the loan off after exactly 20 years. What is the maximum amount that Fred can afford to borrow if the bank charges interest at an annual rate of 10 percent, compounded monthly
Answer:
$10,390.96
Explanation:
The formula for the principal amount is
P = A (1 - (1-r)^n / r)
From the given data, A = 100
r = 10 / 100 * 12 = 10 / 1200 = 0.0083
n= 20 * 12 = 240
Now substitute this data in the formula
P = 100 ( 1 - (1 + 0.0083)^-240 / 0.0083)
P = 100 ( 1 - (1/7.27016) / 0.0083)
P = 100 ( 1 - 0.13755 / 0.0083)
P = 100 ( 0.86245 / 0.0083)
P = 100 * 103.90964
P = $10,390.964
P = $10,390.96
The maximum amount that Fred can afford to borrow if the bank charges interest at an annual rate of 10 percent, compounded monthly is $10,390.96
Answer:
Fred can afford to borrow 10362 dollars
beyer company is considering the purchase of an asset for $250,000. It is expected to produce the following net cash flows. The cash flows occur evenly throughout each year. Assume that Beyer requires a 12% return on its investments. Compute the net present value of this investment. Should Beyer accept the investment
Answer:
Complete question is
Year Net cash flows
1 $65,000
2 $57,000
3 $81,000
4 $139,000
5 $38,000
6 $380,000"
Solution
Year (a)$ (b)$ (c=a*b)$
Year 1 65000 0.893 58045
Year 2 57000 0.797 45429
Year 3 81000 0.712 57672
Year 4 139000 0.636 88404
Year 5 38000 0.567 21546
$271,096
Totals
Total present value of cash inflow (a) $271,096
Total cash outflow (b) $250,000
Net Present Value (c=a-b) $21,096
Note:
A = Net Cash Flows
B = Present Value of 1 at 12%
C = Present Value of cash flows
b) Beyer company should accept investment due to positive net present value of $21,096
ConAgra Foods is a global manufacturer of processed and packaged foods with revenues of $11 billion annually. It recently acquired Pinnacle Foods, which added iconic brands to its portfolio such as Birds Eye, Duncan Hines, Earth Balance, and Vlasic. Pinnacle Foods will continue to have control over its resources and distinct mission, and it will operate independently of ConAgra Foods. Pinnacle Foods is known as a(n) _______.
Answer:
wholly owned subsidiary
Explanation:
A wholly-owned subsidiary is a form of subsidiary arrangement, between two companies, whereby a company is completely owned or its whole stock is bought by another company often referred to as Parent Company after the arrangement or the agreement of the acquisition.
It is also characterized by having control over its resources and specific mission, also operates independently.
Hence, in this case, the right answer is a wholly owned subsidiary
Answer:
Strategic Business Unit
Explanation:
I'm taking the class now
Our newly constructed retail space is projected to need a face lift in 7 years to keep up with changing tastes. Our projections are that the cost will be $2.5 mil. If we set aside a reserve for replacement our best return prospects for a safe investment (i.e. little risk to principle) suggest a 3% annual interest rate. How much should we deposit annually into that reserve account (sinking fund problem)
Answer:
Annual deposit = $326,265.88
Explanation:
The amount to be set aside annually to accumulate $2.5 million in 7 years time ca n be worked out using the future value of an ordinary annuity formula.
The formula is given as follows:
FV = A×( (1+r)^n - 1)/r).
A= FV/ ((1+r)^n - 1)/r
FV - Future value
A- annual deposit
n- number of years
r- rate of return
FV - $2.5 million
A- ?
n- 7
A=2,500,000 ÷ (1.03^7 - 1)/0.03 = 326,265.88
Annual deposit = $326,265.88
On January 10 of the current year, Mary transfer to Green Corporation a machine purchased three years ago for $100,000. On the transfer date, the machine has a $60,000 adjusted basis and a $10,000 FMV. Mary receives all 100 shares of Green stock, worth $100,000, and a two-year Green note worth $10,000. Required:a. What are the amount and character of Mary's recognized gain or loss? b. What is Mary's basis in the stock and note? When does her holding period begin? c. What are the amount and character of Green's gain or loss? d. What is Green's basis in the machine? When does Green's holding period begin?
Answer:
First of all, I believe that their is a mistake on the question, since the FMV of the machine should be $100,000, not $10,000, or else it wouldn't make much sense.
a. What are the amount and character of Mary's recognized gain or loss?
ordinary income of $10,000
The two year note is considered boot and therefore, Mary must report it as ordinary income.
b. What is Mary's basis in the stock and note? When does her holding period begin?
Mary's basis in the stock is $60,000 (the basis of the machine), and $0 for the note (recognized as ordinary income). Her holding period began three years ago when the machine was purchased.
c. What are the amount and character of Green's gain or loss?
Under a carryover basis limit rule (for a section 351 exchange), Green Corporation's basis is reduced, but it not considered a loss or a gain. The basis of the exchanged stock must equal the carryover basis of the property given in exchange.
d. What is Green's basis in the machine? When does Green's holding period begin?
Same as Mary's, the basis is $60,000 and the holding period is 3 years. Since Mary owns 100% of Green Corporation as a result of the exchange, her basis and the corporation's basis will be the same.
Write a Preliminary Investigation Report for the New Century Clinic (not Personal Trainer) case study in the book at the end of chapters 1 and 2. It should be similar to the one in the book written for the Software Case on page 96. Read the Software Case at the end of chapters 1, and 2. Chapter 2 lists the topics that should be included in the PI Report. I have attached a file of interviews with various personnel in the New Century Clinic. Try to come up with the costs like in the sample, even with the limited experience you have in this. This should be about one page long, just like in the sample. Use the same headings as in the sample. This is one report, not one for chapter one and one for chapter two
Answer:
I don't see the question all I see is your whole assignment directsions
The following is a December 31, 2021, post-closing trial balance for Culver City Lighting, Inc. Account Title Debits Credits Cash $ 63,000 Accounts receivable 47,000 Inventory 53,000 Prepaid insurance 23,000 Equipment 110,000 Accumulated depreciation $ 42,000 Patent (net) 48,000 Accounts payable 16,000 Interest payable 6,000 Notes payable (due in 10 years) 140,000 Common stock 78,000 Retained earnings 62,000 Totals $ 344,000 $ 344,000 a. Calculate the current ratio. b. Calculate the acid-test ratio. c. Calculate the debt to equity ratio.
Answer:
a. Current ratio = 5.17
b. Acid test ratio = 3.06
c. Debt to equity ratio = 0.26
Explanation:
a. Current ratio = Current assets / Current liabilities
Current t assets = $63,000 + $47,000 + $53,000 + $23,000
= $186,000
Current liabilities = $16,000 + $6,000 + *$14,000
= $36,000
• Note $14,000 is gotten by ; $140,000 / 10 years.
Current ratio = $186,000 / $36,000
= 5.17
b. Acid test ratio = Quick assets / Current liabilities
Quick assets = Current assets w/o inventory
= $63,000 + $47,000
= $110,000
Current liabilities = $36,000
Acid test ratio = $110,000 / $36,000
= 3.06
c. Debt to equity ratio = Total liabilities / Shareholder's equity
Total liabilities = $36,000
Shareholder's equity = $78,000 + $62,000
= $140,000
Debt to equity ratio = $36,000 / $140,000
= 0.26
Common arguments against corporate social responsibility argue that: Select one: a. CSR detracts from the fundamental economic role of businesses. b. CSR does not achieve a triple bottom line. c. there is no positive relationship between CSR and shareholder returns. d. there are no financial benefits of social or environmental initiatives.
Answer: CSR detracts from the fundamental economic role of businesses.
Explanation:
Corporate social responsibility simply refers to the responsibility of businesses to their environment. This maybe in the form of employment opportunities, scholarships, provision of infrastructure etc.
Common arguments against corporate social responsibility argue that CSR detracts from the fundamental economic role of businesses. Critics believe the main role of business is to make profit and CSR detracts from that.
The responsiveness of the organization as a whole to stakeholder intelligence consists of the initiatives that the firm adopts to ensure that it abides by or exceeds stakeholder expectations and has a positive impact on _____________ issues.
Answer:
Serious
Explanation:
On January 1, 2005, Marcy Company purchased 1,000 shares of its own common stock for $22,000. On February 1, 2005, they sold 600 of these shares for $25 per share, and on March 1, 2005, they sold the remaining 400 shares for $15 per share. The journal entry required on March 1 will include: A) credit Contributed Capital, Treasury Stock, $1,800 B) debit Retained Earnings for $1,800 C) debit Retained Earnings for $2,800 D) debit Contributed Capital, Treasury Stock, $2,800 E) debit Contributed Capital, Treasury Stock, $1,800
Answer: E) debit Contributed Capital, Treasury Stock, $1,800
Explanation:
Treasury stock was bought at price of;
= 22,000/1,000
= $22
Sold 600 for $25 so they made a profit of;
= (25 - 22) * 600
= $1,800
This gain was sent to Contributed Capital, Treasury Stock.
Now that stock is to be sold on March 1, it is sold at $15. Loss from initial purchase is;
= ( 22 - 15) * 400
= $2,800
Debit Contributed Capital, Treasury Stock of the maximum amount it can be debited of to reflect this loss which would be $1,800 which was gained in the February purchase. The rest of the loss will go to Retained earnings.
The agency relationship in corporate finance occurs:__________
Answer:
when the shareholders hire a manager to run their company.
Explanation:
An agency relationship in corporate finance is a situation whereby a party known as an agent is hired by another party which is the principal, to perform certain functions or services. Based on this question, the share holders are known as the principal while the manager act as the agent. The relationship is formed after the agent has agreed that he or she will represent the principal
Diseconomies of scale arise primarily because: of the difficulties involved in managing and coordinating a large business enterprise. the short-run average total cost curve rises when marginal product is increasing. beyond some point marginal product declines as additional units of a variable resource (labor) are added to a fixed resource (capital). firms must be large both absolutely and relative to the market to employ the most efficient productive techniques available.
Answer: of the difficulties involved in managing and coordinating a large business enterprise
Explanation:
Diseconomies of scale is when there's an increases in average total cost used during the production of a product due to the expansion in size of the firm in the longrun.
The main factor that can be attributed to diseconomies of scale is when there's difficulty in the effective and efficient control and coordination of the operations of a firm due to its growth.
Diseconomies of scale arise primarily because of the difficulties involved in managing and coordinating a large business enterprise.
Diseconomies of scale arise primarily because of the difficulties involved in managing and coordinating a large business enterprise. Option (b) is correct.
Diseconomies of scale can happen for a number of reasons, but the inability to effectively manage an expanding staff is a common culprit. A company's internal overcrowding impact is frequently the main factor contributing to scale-related inequities.
Economies of scale result in reduced production costs and higher production while diseconomies of scale result in higher production costs.
Therefore, Option (b) is correct.
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The Wall Street Journal reports that the rate on three-year Treasury securities is 1.22 percent and the rate on four-year Treasury securities is 1.4 percent. The one-year interest rate expected in three years, E(4r1), is 1.8 percent. According to the liquidity premium hypotheses, what is the liquidity premium on the four-year Treasury security, L4? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))
Answer:
0.142%
Explanation:
We are required to find the liquidity premium on the four-year Treasury security (L4)
1R4 = 1.4%
1R3 = 1.22%
E(4r1) = 1.8%
1 + 1R4 = [{(1+1R3)^3} * (1+E(4R1) + L4)]^1/4
1 + 0.014 = [{(1 + 0.0122)^3) * (1+0.018 + L4)]^1/4
1.014^4 = [{(1 + 0.0122)^3) * (1+0.018 + L4)]
1.057187 = (1.0370483) * (1.018 + L4)
1.057187/1.0370483 = 1.018 + L4
1.0194192 = 1.018 + L4
L4 = 1.0194192 - 1.018
L4 = 0.00142
L4 = 0.142%
Hence, liquidity premium on the four-year Treasury security(L4) = 0.142%
After a tragic event in which an armed intruder storms into a mall and fatally shoots several people, the city of Belmonte institutes a law that prohibits any form of weapon in public retail establishments. This reaction would be an example of following which school of risprudential toucht? a. Sociological b. Historical c. Irrational Forces d. Natural Law e. Legal Realism
Answer: c. Irrational Forces
Explanation:
The Irrational Forces school of Jurisprudential thought explains that sometimes laws are passed due to some stimuli in the society that draws such a reaction from the society that the law makers pass a law under pressure
The law therefore does not have to be rational or based on reason. The law makers of Belmonte passing this law against firearms in public areas did this because of the public shooting. It therefore falls under this school of thought.
__________ can be used to create a perfect inflation hedge.
a. Gold
b. Real estate
c. TIPS
d. The S&P 500 Index
e. None of the options are correct.
Answer:
c. TIPS
Explanation:
TIPS which is an acronym for Treasury inflation-protected securities is a kind of bond peculiar to the United States which is specifically formulated to shield or safeguard investments during the inflation period over a given time. It dynamically adjusts as inflation occurs, thereby protects the direct cost of investment and its rates of returns.
Hence, in this situation, the correct answer is option C. TIPS
5. Which is an external users of accounting?
a. shareholders
b. prospective investors
c. managers
d. None of the above.
Answer:
Its b (prospective investors)
5. Mr. G has $15,000 to invest. He is undecided about putting the money into tax-exempt municipal bonds paying 7 percent annual interest or corporate bonds paying 9.5 percent annual interest. The two investments have the same risk. a) Which investment should Mr. G make if his marginal tax rate is 33 percent? b) Would your conclusion change if Mr. G’s marginal tax rate is only 15%?
Answer:
a. Municipal bond
b. Yes. To Corporate Bond.
Explanation:
Municipal bonds are tax exempt so the better option will be the one offering a higher return after it is adjusted for tax.
a. Corporate after-tax rate = 9.5% * ( 1 - 33%)
= 0.06365
= 6.4%
Municipal rate is higher at 7% and so is a better option.
b. Corporate after-tax rate = 9.5% * ( 1 - 15%)
= 0.08075
= 8.08%
Corporate bond return is now higher than Municipal bond so is a better option.
Answer:
a. Municipal bond
b. Yes. To Corporate Bond
Explanation:
Regina Corp. is a property and casualty insurance company in its third year of operations and has a net loss of $100,000. Regina had taxable income of $10,000 and $30,000 in its first and second year of operations, respectively. Regina expects to be profitable within the next year. Regina is allowed to carry back the net operating loss to previous years. The enacted income tax rate is 40%. The income tax benefit from the NOL carryforward shown on Regina's income statement in the year of the loss is
Answer:
$24,000
Explanation:
Total Taxable income of first and second year = $10,000 + $30,000 = $40,000
Net loss in 3rd year = $100,000
Net Operating loss carry back = Regina Taxable income Total of first and second year of operations
Net Operating loss carry back = $40,000
Net Operating loss Carry forwards = Net loss - Net Operating loss carry back
Net Operating loss carry forward = $100,000 - $40,000
Net Operating loss carry forward = $60,000
Income tax rate = 40%
Income tax benefit from the Net Operating loss carry forward = Net Operating loss carry forward * Income tax rate
Income tax benefit from the Net Operating loss carry forward = $60,000 * 40%
Income tax benefit from the Net Operating loss carry forward = $24,000 .
Which of the following best defines rational behavior? Group of answer choices A. Analyzing the total gains from a decision. B. Improving net gain by pursuing decisions as long as the marginal benefits exceed the marginal costs. C. Seeking to gain by choosing to undertake actions as long as the marginal costs exceed the associated marginal benefits. D. Seeking to maximize total gain regardless of cost.
Answer:
B. Improving net gain by pursuing decisions as long as the marginal benefits exceed the marginal costs.
Explanation:
A rational consumer continues consumption as long as marginal benefit derived from consumption exceeds marginal cost.
Marginal benefit is the increase in benefit as a result of consuming an extra unit of a product.
Marginal cost is the increase in cost as a result of consuming one more unit of a product
For example, the marginal benefit from consuming a 5th bottle of a drink is $5. The cost of the bottle is $4. The rational consumer can increase benefit by consuming one extra bottle of the drink. If the cost of the drink were $7, a rational consumer would not consume the 5th bottle because marginal cost exceeds marginal benefit
ABC Inc has captured the market for school glue. It is preferred by both students and parents alike. It takes very little capitalization to enter the market but nobody successfully does. The glue clearly needs no patents or secret formulas. This type of market is called: pure or perfect competition. asymmetric oligopoly. competitive monopoly. None of the above described the appropriate market structure in this case
Answer:
None of the above described the appropriate market structure in this case
Explanation:
The market is an example of a monopolistic competition
A monopolistic competition is when there are many firms selling differentiated products in an industry. A monopoly has characteristics of both a monopoly and a perfect competition. the demand curve is downward sloping. it sets the price for its goods and services
A monopoly is when there is only one firm operating in an industry. there are usually high barriers to entry of firms. the demand curve is downward sloping. it sets the price for its goods and services.
A perfect competition is characterized by many buyers and sellers of homogenous goods and services. Market prices are set by the forces of demand and supply. There are no barriers to entry or exit of firms into the industry
An Oligopoly is when there are few large firms operating in an industry
Trey, Inc. reports a taxable loss of $140,000 for 2018. Its taxable incomes for the years 2015 through 2017 respectively were $25,000, $35,000, and $40,000. Trey has no temporary or permanent differences. Trey elects the carryback provision. Trey expects taxable income in future years and has a tax rate of 30% for all periods affected. What should Trey report as Net Loss on its 2018 income statement?
Answer:
$117500
Explanation:
Taxable loss = $140000 for 2018
Taxable incomes : $25000 for 2015, $35000 for 2016, $40000 for 2017
tax rate = 30%
Net loss on 2018 income statement can be offset by the taxes paid on taxable income for 2 years prior to 2018 ( i.e 2016 and 2017 )
first calculate taxes on taxable incomes for 2016 and 2017
$35000 * 30% = $10500
$40000 * 30% = $12000
hence taxable profit = 10500 + 12000 = $22500
Net loss to be reported on 2018 income statement
= $140000 - $22500 = $117500
Define how translational research plays a role in influencing policy?
Answer:
It helps in thinking new ways and determining new insights in order to embed them in different policy options
Explanation:
Translational Research is the process of applying basic clinical knowledge to ascertain medical needs and improve health outcomes by involving in clinical trials. There are many areas where treatment and cures of certain sickness are not yet discovered. When applying translational research, we try to understand situations and involve in new areas of research work by attempting clinical trials. This provides new insights and ways of thinking which then has an influence on making key policy decisions.
Which type of worker would most likely be able to begin work after receiving a high school degree and completing an on-the-job apprenticeship? a miner a forester a conservationist a park worker
Answer:
I think it would be a park worker
Explanation:
Park workers don't use as much heavy equipment as miners
A worker would most likely be able to begin work after receiving a high school degree and completing an on-the-job apprenticeship is conservationist. Option C is correct.
What is Conservationist?A conservationist is a person who works to preserve wildlife, plants, or their natural environments. While some environmentalists teach students about environmental issues, others clean up seabirds after oil spills in the water. He might wish to become a conservationist if you are concerned about protecting the environment and wildlife.
A person active in conservation is one who works to safeguard wildlife, plants, and other natural resources as well as to stop the loss and waste of these resources.
Further a person who complete his education Biology A-Levels are essential, as well as at least one other subject. Furthermore, geography has its uses. A BSc in Biology, Environmental Science, or Zoology might be a suitable place to start after A-Levels before specializing during a Masters for post of conservationist.
Thus option C is correct.
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The use of theory and observation is more difficult in economics than in sciences such as physics due to the difficulty in a. formulating theories about economic events. b. performing an experiment in an economic system. c. applying mathematical methods to economic analysis. d. analyzing available data.
Answer:
b. performing an experiment in an economic system.
Explanation:
In contrast to scientific experimentation, whereby connections and differences can be measured between two or more variables. In economics, theory and observation are more difficult than in sciences such as physics due to the difficulty in performing an experiment in an economic system, as human beings' opinions change over time, due to dynamism in human society.
Hence, in this case, the correct answer is option
Prices of existing bonds move _________ as market interest rates move _________.
a) down, down
b) up, down
c) Bond prices don't move as market interest rates move.
Answer:
The answer is B.
Explanation:
Bonds prices and market interest rates are negatively correlated i.e if the market interest rate(yield-to-maturity) of a bond goes up, the price of the bond goes down and if the yield-to-maturity(interest rate) rate goes down, the price of the bond goes up.
Usually, bonds with high interest rate are riskier than bonds with low interest rate.
_____refers to the quantity of a good or service that businesses are willing and able to provide.
a. Supply
b. Scarcity
c. Demand
d. Trade-off
Answer:
option a supply is the right answer
3. Beginning three months from now, you want to be able to withdraw $1,500 each quarter from your bank account to cover college expenses over the next three years. If the account pays .37 percent interest per quarter, how much do you need to have in your bank account today to meet your expense needs over the next three years
Answer:
The total amount needed = $17,574.47
Explanation:
Total amount needed = Annuity payment * Present value annuity
When Present Value annuity = Annuity payment * [1 – [1/ (1 + r)^12] / r}
R = Rate of Interest = 0.37% = 0.0037
N= No. of Periods = 12(Quarters)
= Annuity payment * {[1 – [1/ (1 + 0.0037)12] / 0.0037}
= $1,500 * {[1 – (1/ 1.0037)12] / 0.0037}
= $1,500 * {[1 – (0.95664963507)] / 0.0037}
= $1,500 * {0.04335036493 / 0.0037}
= $1,500 * 11.716315
= $17574.4725
Hence, the total amount needed = $17,574.47
You own an oil pipeline which will generate $2 million cash return over the coming year. The pipeline’s operating costs are negligible, and it is expected to last for a very long time. Unfortunately, the volume of oil shipped is declining, and cash flows are expected to decline by 4 % per year. The discount rate is 10 %. What is the PV of the pipeline’s cash flows if its cash flows are assumed to last forever?
Answer:
$14,285,714.29
Explanation:
we can use the discounted cash flow model formula for a perpetuity:
PV of infinite cash flows = cash flow in 1 year / (required rate of return - growth rate)
cash flow in 1 year = $2,000,000required rate of return = 10%growth rate = -4%PV of infinite cash flows = $2,000,000 / (10% + 4%) = $14,285,714.29
This formula is used to determine the present value of a firm's future cash flows.
