What is the present value of a perpetual stream of cash flows that pays $70,000 at the end of year one and then grows at a rate of 5% per year indefinitely? The rate of interest used to discount the cash flows is 11%.
What is the present value of a perpetual stream of cash flows that pays $70,000 at the end of year one and then grows at a rate of 5% per year indefinitely? The rate of interest used to discount the cash flows is 11%.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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What is the
$70,000 at the end of year one and then grows at a rate of
5% per year indefinitely? The rate of interest used to discount the cash flows is
11%.
Question content area bottom
Part 1
The present value of the growing perpetuity is $
enter your response here
. (Round to the nearest cent.)
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