Question
In: Finance
An investment that currently sells for $80 makes payments every year forever, which grow at 3%...
An investment that currently sells for $80 makes payments every year forever, which grow at 3% annually. If the next payment amount is $9, what is the annual return on this investment?
Solutions
Expert Solution
Present value of growing perpetuity = PMT / (K - g)
PMT = Next payment amount
K = annual return
g = growth rate
80 = 9 / (K - 0.03)
80k - 2.4 = 9
K = 11.4 / 80
= 14.25%
jeff jeffy answered 2 years agoRelated Solutions
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