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Assume the appropiate discount rate is 3%. A company will receive a payment every year forever,...

Assume the appropiate discount rate is 3%. A company will receive a payment every year forever, which will grow at 2% annually. The amount of the first payment will be $2,000. What is the current value of this series of payments?

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Expert Solution

This is a growing perpetuity,

Value of growing perpetuity = C1/(r - g)

Value = 2,000/(0.03 - 0.02)

Value = $200,000

jeff jeffy answered 2 years ago
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