Profits grow at annual rate of thrree percent

Assignment Help Business Economics

Reference no: EM131169491

The head of the accounting department at a major software manufacturer has asked you to put together a pro forma statement of the company's value under several possible growth scenarios and the assumption that the company’s many divisions will remain a single entity forever. The manager is concerned that, despite the fact that the firm’s competitors are comparatively small, collectively their annual revenue growth has exceeded 50 percent over each of the last five years. She has requested that the value projections be based on the firm’s current profits of $4.4 billion (which have yet to be paid out to stockholders) and the average interest rate over the past 20 years (9 percent) in each of the following profit growth scenarios:

a. Profits grow at an annual rate of 10 percent. (This one is tricky.)

Instructions: Round your responses to 2 decimal places.

b. Profits grow at an annual rate of 3 percent.

billion

c. Profits grow at an annual rate of 0 percent.

billion

d. Profits decline at an annual rate of 2 percent.

billion

Reference no: EM131169491

Questions Cloud

Constant rate does the owner believe that profits will grow : You’ve recently learned that the company where you work is being sold for $275,000. The company’s income statement indicates current profits of $10,000, which have yet to be paid out as dividends. Assuming the company will remain a “going concern” in..

The cross-price elasticity between ketchup and hamburgers : If the cross-price elasticity between ketchup and hamburgers is −1.5, a 2 percent decrease in the price of ketchup will lead to a:

What is the amount of interest paid in the first payment : Sam borrowed $10,000 with a promise to repay the loan in 6 years with a uniform monthly payment and a single payment of $1,000 at the end of six years at a nominal interest rate of 12% per year. What is the amount of each payment? What is the amount ..

Marketing department estimates income elasticity of demand : If Starbucks’s marketing department estimates the income elasticity of demand for its coffee to be 2.15, how will the prospect of an economic boom (expected to increase consumers’ incomes by 5 percent over the next year) impact the quantity of coffee..

Profits grow at annual rate of thrree percent : The head of the accounting department at a major software manufacturer has asked you to put together a pro forma statement of the company's value under several possible growth scenarios and the assumption that the company’s many divisions will remain..

Define resources-quality-technology and costs : Define resources, quality, technology and costs. Discuss how they compare to each other in the world of health care economics.

How much does this corporation pay per quarter on this loan : A large Corporation constructed a small office building for their firm approximately 5 years ago. They financed it with a bank loan for $450,000 over 15 years at 6% interest with quarterly payments and quarterly compounding. The loan can be repaid at..

Discussed several different pricing tactics : In chapter 15, we discussed several different pricing tactics aimed at consumers. Which of these do you respond most favorably to? Why? How might this be impacted by the type of consumer (lifestyle, demographics, etc.)? (marketing class)

Association is interested in starting new scholarship fund : The Texas Tech alumni association is interested in starting a new scholarship fund for incoming students. Each scholarship will be $500 and they anticipate funding 10 students each year. All scholarships are awarded at the end of the year. The organi..

User Account

All Pages