Over the next three years, a firm is expected to earn economic profit of $200,000 in the first year, $300,000 in the second year, and $250,000 in the third year. After the end of the third year, the firm goes out of business.
-a. If the risk-adjusted discount rate is 9 percent for each of the next three years, the value of the firm is $______________. The firm can be sold today for a price of $______________.

Question

Quizplus · Accepted Answer

The Answer of Over the next three years, a firm is expected to earn economic profit of $200,000 in the first year, $300,000 in the second year, and $250,000 in the third year. After the end of the third year, the firm goes out of business.
-a. If the risk-adjusted discount rate is 9 percent for each of the next three years, the value of the firm is $______________. The firm can be sold today for a price of $______________.

Over the Next Three Years, a Firm Is Expected to Earn