7.19 Sparkling Water, Inc., sells 2 million bottles of drinking water each year. Each bottle sells at

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7.19 Sparkling Water, Inc., sells 2 million bottles of drinking water each year. Each bottle sells at $2.5 in real terms and costs per bottle are $0.7 in real terms. Sales income and costs occur at year-end. Sales income is expected to rise at a real rate of 7 percent annually, while real costs are expected to rise at 5 percent annually. The relevant, real discount rate is 10 percent. The corporate tax rate is 34 percent. What is Sparkling worth today?

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Corporate Finance

ISBN: 9780071229036

6th International Edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe

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