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Sparkling Water, Inc., expects to sell 2.98 million bottles of drinking water each year in perpetuity....

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Finance

Sparkling Water, Inc., expects to sell 2.98 million bottles ofdrinking water each year in perpetuity. This year each bottle willsell for $2.15 in real terms and will cost $1.08 in real terms.Sales income and costs occur at year-end. Revenues will rise at areal rate of 6 percent annually, while real costs will rise at areal rate of 5 percent annually. The real discount rate is 12percent. The corporate tax rate is 34 percent.
  
What is the company worth today? (Do not roundintermediate calculations. Enter your answer in dollars, notmillions of dollars, e.g., 1,234,567.)
  
Value of the firm          $ ____________

Answer & Explanation Solved by verified expert
4.1 Ratings (719 Votes)
We need to calculate the present value of the sales revenues For year 1 RevenueNumber of bottles soldPrice per bottle Number of bottles sold298 million29810000002980000 Price per bottle215    See Answer
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Sparkling Water, Inc., expects to sell 2.98 million bottles ofdrinking water each year in perpetuity. This year each bottle willsell for $2.15 in real terms and will cost $1.08 in real terms.Sales income and costs occur at year-end. Revenues will rise at areal rate of 6 percent annually, while real costs will rise at areal rate of 5 percent annually. The real discount rate is 12percent. The corporate tax rate is 34 percent.  What is the company worth today? (Do not roundintermediate calculations. Enter your answer in dollars, notmillions of dollars, e.g., 1,234,567.)  Value of the firm          $ ____________

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