Explore BrainMass
Share

Calculating the constant growth rate in the given case

This content was STOLEN from BrainMass.com - View the original, and get the solution, here!

You've recently learned that the company where you work is being sold for $550,000. The company's income statement indicates current profits of $24,000, which have yet to be paid out as dividends. Assuming the company will remain a "going concern" indefinitely and that the interest rate will remain constant at 7 percent, at what constant rate does the owner believe that profits will grow?

© BrainMass Inc. brainmass.com September 25, 2018, 11:32 am ad1c9bdddf - https://brainmass.com/economics/estimation-and-forecasting/calculating-the-constant-growth-rate-in-the-given-case-586422

Solution Preview

Current price of company=Po=$550,000
Current profit of company=Current Dividends=Do=$24,000

Let ...

Solution Summary

Solution depicts the steps to estimate the constant growth rate in the given case.

$2.19