Economic profit How do we value a firm? Suppose the firm's stream of periodic economic profits is Io, II1, ∏,∴ and r is the rate of interest. Then the present-value of the firm's economic profit stream is PV=IIo t l+r(1+r)Economic Profit How do we value a firm? Suppose the firm’s stream of periodic economic profits is 0 , 1 , 2 , … and r is the rate of interest. Then the present-value of the firm’s economic profit stream is PV r r = + + + +  +   0 1 2 1 2 (1 ) 