Answered: Q8: What is the value of a perpetuity…

Q8: What is the value of a perpetuity of P100 per year if the discount rate is 5% and the cash flows do not begin until two years from now?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

I need your help tutor!

This is how you answer the problem

(a) Identify the Given and the Unknown or what is being asked in the problem

(b)Provide the formula to be used

(c)Plug in the given in the formula if there is a derivation of the formula please show it

(d)Box the final answer. however, the final answer is already included in the problem, what you need to do is to match your answer and the answer in the book. Because in the book they only provide the answer but not the solution.

Problem:

Q8: What is the value of a perpetuity of P100 per year if the discount rate is 5% and the cash flows do
not begin until two years from now?
Answer: P = P1,814.05

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