Sparkling Water Ltd, expects to sell 8 million bottles of drinking water each year in perpetuity. This year each bottle will sell for 3.25 cedis in real terms and will cost 1.80 cedis in real terms. Sales income and costs occur at year end. Revenues will rise at real rate of 10% annually, while real costs will rise at real rate of 10% annually. The real discount rate is 20%. The corporate tax rate is 25%. What is Sparkling worth today.

Sparkling Water Ltd, expects to sell 8 million bottles of drinking water each year in perpetuity. This year each bottle will sell for 3.25 cedis in real terms and will cost 1.80 cedis in real terms. Sales income and costs occur at year end. Revenues will rise at real rate of 10% annually, while real costs will rise at real rate of 10% annually. The real discount rate is 20%. The corporate tax rate is 25%. What is Sparkling worth today.

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter13: Other Financing Alternatives

Section: Chapter Questions

Problem 1bM

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