Need help with this accounting question Find the annual interest rate that would create a perpetual cash flowstream of $20,000 when the present value of the asset is $250,000.a. 2.5 percentb. 25 percentc. 12.5 percentd. 8 percent

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Answered: Find the annual interest rate that…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 3BE

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The following cash-flow streams need to be analyzed: END OF YEAR CASH-FLOW STREAM $1 $2 $3 $4 5 W 100 200 200 300 1,$300 X 600 – – – – Y – – – – 11,200 Z $200 – $500 – 0,300 a. Calculate the future (terminal) value of each stream at the end of year 5 with a compound annual interest rate of 10 percent. b. Compute the present value of each stream if the discount rate is 14 percent.
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Find the annual interest rate that would create a perpetual cash flow stream of $20,000 when the present value of the asset is $250,000. a. 2.5 percent b. 25 percent c. 12.5 percent d. 8 percent