You are running a hot internet company. Market analysts estimate that its earnings will grow at 30% per annum for the ne

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answerhappygod
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You are running a hot internet company. Market analysts estimate that its earnings will grow at 30% per annum for the ne

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You are running a hot internet company. Market analysts estimate
that its earnings will grow at 30% per annum for the next five
years (that is, years 1 – 5). After that, as competition increases,
earnings growth is expected to slow down to 2% per annum and
continue at that level forever. Your company has just announced
earnings of $1 million today. Assuming end of the year cash flows,
what is the present value of all future earnings if the
interest rate is 8 percent per annum?
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