Over the next three years, a firm is expected to earn economic profits of $120,000 in the first year, $140.000 in

Over the next three years, a firm is expected to earn economic profits of $120,000 in the first year, $140.000 in the second year, and $1000,000 in the third year. After the end of the third year, the firm will go out of business.

a. If the risk – adjusted discount rate is 10 percent for each of the next three years. the value of the firm is $______. The firm can be sold today for a price of $________.

b. If the risk-adjusted discount rate is 8 percent for each of the next three years, the value of the firm is $______. The firm can be sold today for a price of $_______.

 

 

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