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Corporate Finance

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Moderate

Future Growth

CORPFN-YGSG48

Your company specializes in home technology and is currently developing a new revolutionary solution to help control energy costs. The new product is expected to be ready for launch in three years. After the launch, the new product will generate earnings for \$1.3 million, with a growth rate of 5% per year forever. The interest rate is 7.5%.

What is the present value of the future earnings generated by the new product?

A

$52,000,000

B

$44,997,296

C

$43,950,847

D

$41,857,950