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You are running a hot Internet company. Analysts predict that its earnings will grow at 20% per year for the next five years. After that,
You are running a hot Internet company. Analysts predict that its earnings will grow at
20%
per year for the next five years. After that, as competition increases, earnings growth is expected to slow to
6%
per year and continue at that level forever. Your company has just announced earnings of
$1
million. What is the present value of all future earnings if the interest rate is
8%?
(Assume all cash flows occur at the end of the year.)
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