1.A Assume that a Peruvian company, DMB LLC, just reported its earnings this year (year 0 ). The reported revenue was $9 million and the reported cost was $10 million. Its revenue is expected to grow 6% annually, while its cost is expected to grow 2% annually. Mark ALL the CORRECT statements. For this question, profit = revenue cost. First, apply the Gordon Formula to calculate the present value of all future revenues and the present value of all future costs separately. Then, calculate the present value of all future profits, which equals the present value of all future revenues minus the present value of all future costs. a) The first year that the profit of the compary becomes positive is year 3 . b) If the discount rate is 12%, the present value of all future profits of the company is $50 million. c) If the discount rate is 10%, the present value of all future profits of the company is $111 million. d) If the discount rate is 5%, the present value of all future profits of the company is infinite. e) The present value of all future profits of the company is always positive no matter what the discount rate is. 1.B Suppose the capital share in Canada is =2/5. Mark ALL the CORRECT statements. For this question, use the growth accounting formula given in class. a) If capital increases by 10%, labor hours increase by 5%, and total output increases by 10% relative to last year, then TFP should decrease by 1%. b) If capital increases by 15%, labor hours decrease by 5%, and TFP increases by 5% relative to last year, then total output should increase by 5%. c) If capital increases by 10%, TFP increases by 10%, and total output increases by 10% relative to last year, then labor hours should increase by 10%. d) If labor hours increase by 10%, TFP increases by 5%, and total output increases by 15% relative to last year, then capital should increase by 1%