Norwood Investments is putting out a new product. The product will pay out $25,000 in the first year, and after that the payouts will grow by an annual rate of 2.5 percent forever. If you can invest the cash flows at 7.5 percent, how much will you be willing to pay for this perpetuity (round to the nearest dollar)?
Norwood Investments is putting out a new product. The product will pay out $25,000 in the first year, and after that the payouts will grow by an annual rate of 2.5 percent forever. If you can invest the cash flows at 7.5 percent, how much will you be willing to pay for this perpetuity (round to the nearest dollar)?
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 22P
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Norwood Investments is putting out a new product. The product will pay out $25,000 in the first year, and after that the payouts will grow by an annual rate of 2.5 percent forever. If you can invest the cash flows at 7.5 percent, how much will you be willing to pay for this perpetuity (round to the nearest dollar)?
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