Share
Explore BrainMass

Present value of all future earnings

You are running a hot internet company. Analysts predict that its earnings will grow at 30% per year for the next five years. After that, as competition increases, earnings growth is expected to slow to 2% per year and continue at that level forever. Your company has just announced earnings of $1,000,000. What is the present value of all future earnings if the interest rate is 8%? (Assume all cash flows occur at the end of the year).

Can you help me get started with this assignment?

Solution Preview

** The answers are also in the attached file **

You are running a hot Internet company.  Analysts predict that its earnings will grow at 30% per year for the next five years.  After that, as competition increases, earnings growth is expected to slow to 2% per year and continue at that level forever.  Your company has just announced earnings of $1,000,000.  What is the present value of all future earnings if the interest rate is 8%?  (Assume all cash ...

Solution Summary

Calculates the present value of all future earnings given the interest rate.

$2.19