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Assume the appropiate discount rate is 7%. A company will receive a payment every year forever,...

Assume the appropiate discount rate is 7%. A company will receive a payment every year forever, which will grow at 1% annually. The amount of the first payment will be $6,000. What is the current value of this series of payments?

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Expert Solution

Present value= PMT after year 1/ discount rate- growth rate

PMT after year 1=$6,000

discount rate=7% i.e0.07

growth rate=1%

Present value=$6,000/ (0.07-0.01)

=1,00,000$

jeff jeffy answered 2 years ago
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