A firm is expected to earn a profit of $20,000 per month for the next two years and then to be sold for $1,000,000. If the discount rate is 1 percent per month, what is the present value of the firm? How does the result change if the discount rate (i)increases or (ii)decreases?

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The Answer of A firm is expected to earn a profit of $20,000 per month for the next two years and then to be sold for $1,000,000. If the discount rate is 1 percent per month, what is the present value of the firm? How does the result change if the discount rate (i)increases or (ii)decreases?

A Firm Is Expected to Earn a Profit of $20,000