What is the value of the business today

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Consider a business that is expected to continue indefinitely. Today is Year 0. The business's projected cash flow for Year 1 (which would arrive exactly 1 year from today) is 40 in real dollars that have the same purchasing power as Year 0 dollars.

Expected inflation is 5% per year.

Suppose the expected nominal growth rate for the business's cash flows is 4% per year and the nominal discount rate for the business's cash flows is 13%.

Problem 1: What is the value of the business today?

Reference no: EM132969426

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