Explore BrainMass
Share

Explore BrainMass

    Calculating the constant growth rate in the given case

    This content was COPIED from BrainMass.com - View the original, and get the already-completed 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 October 10, 2019, 7:33 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