Reconstruct Table 12.9 assuming a steady-state growth rate of 10 percent per year. Your answer will illustrate
Question:
Reconstruct Table 12.9 assuming a steady-state growth rate of 10 percent per year. Your answer will illustrate a fascinating theorem, namely, that book rate of return equals the economic rate of return when the economic rate of return and the steady-state growth rate are the same.
Transcribed Image Text:
Year 3. 6. Book income for store* +131 +131 -67 +33 +83 +131 +131 +131 -67 +33 +83 -67 +33 +83 +131 -67 +33 +83 -67 +33 -67 Total book income -67 -34 +49 +180 +311 +442 Book value for store 333 1,000 833 667 500 167 1,000 833 667 500 333 833 3 1,000 667 500 1,000 4 833 667 5 1,000 833 1,000 2,500 1,000 1,833 Total book value 3,000 3,333 3,500 Book ROI for all stores = total book income total book value +.126* -,067 -.019 +.02 +.06 +.093
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Related Book For
Principles of Corporate Finance
ISBN: 978-0072869460
7th edition
Authors: Richard A. Brealey, Stewart C. Myers
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