Maximizing the lifetime value of the firm is equivalent to maximizing the firm's current profits if the:
A) interest rate is larger than the growth rate in profits and both are constant.
B) growth rate in profits is constant and is larger than the interest rate.
C) interest rate is smaller than the growth rate of profits.
D) growth rate of profits and the interest rate are equal.

Question

Quizplus · Accepted Answer

Maximizing the lifetime value of a firm is equivalent to maximizing the firm's current profits when the interest rate is larger than the growth rate in profits, assuming both rates are constant. This is because, under these conditions, the present value of future profits decreases as the time horizon extends, making current profits more valuable.

Maximizing the Lifetime Value of the Firm Is Equivalent to Maximizing