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3. At a large textile manufacturing, the accounting department head has requested you to put together a pro forma statement of the company's value under
3. At a large textile manufacturing, the accounting department head has requested you to put together a pro forma statement of the company's "value" under many potential growth scenarios and the expectation that the various divisions of the company will forever remain a single entity. The company's manager is alarmed that, despite the fact that the company's rivals are relatively limited, their annual sales growth for each of the last five years has collectively exceeded 50%. In each of the following profit growth scenarios, the accounting department head recommended that the valuation forecasts be based on the company's profits of Php3.2 billion (which has yet to be paid out to stockholders) and the average interest rate over the past 20 years (6%): A. 4% annual growth rate of profits. B. 2% annual growth rate of profits. C. 0% annual growth rate of profits. D. 9% annual growth rate of profits. (tricky one!)
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