The present value of a growing perpetuity, with cash flow C1 occurring one year from now,...

The present value of a growing perpetuity, with cash flow C₁ occurring one year from now, is given by: [C₁/(r - g)], where r > g.

Group of answer choices

True

Fals

Solutions

Expert Solution

Present value of growing perpetuity = Expected value / (Required rate of return - growth rate)

[C₁/(r - g)], where r > g

Answer: True

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

The present value, today, of the terminal (perpetuity) value equity cash flow that begins in 7...

The present value, today, of the terminal (perpetuity) value equity cash flow that begins in 7 years is $6,700,000 assuming a cost of equity equal to 8%. The year 7 free cash flow (beginning of the growing perpetuity) is $550,000. What is the growth rate required for the continuation value (terminal value perpetuity) term? Use the mid-year discounting convention. A 2.83 b. 2.62% c. 3.14% d. 3.56%

The present value of a perpetuity, with the first cash flow paid in 4 years time,...

The present value of a perpetuity, with the first cash flow paid in 4 years time, is equivalent to receiving $100,000 in 15 years time. The perpetuity and the lump sum are of equivalent risk and have a required rate of return of 10%. What is the annual cash flow associated with the perpetuity?

What is the present value of a perpetuity that starts paying exactly two years from now 1,000 per year?

What is the present value of a perpetuity that starts paying exactly two years from now 1,000 per year? Assume required rate of return is 10% $8,789.12 $10,000 $8,264.46 $9090.91

What is the present value of a growing perpetuity that has an initial payment of $20,000...

What is the present value of a growing perpetuity that has an initial payment of $20,000 one year from now. Assume a growth rate of 5% and a rate of return equal to 9%. Question options: $50,000.00 $500,000.00 $222,222,22 $400,000.00

A growing perpetuity of cash flows has a first cash flow of $500 and each subsequent...

A growing perpetuity of cash flows has a first cash flow of $500 and each subsequent cash flow grows by 2%. The appropriate discount rate is 10%. If the first cash flow occurs in 2 years, what is the value of the growing perpetuity in 5 years? $6,632.55 $6,250.00 $5,165.29 $8,318.75

What is the Net Present Value of the following cash flow stream? Year Cash Flow 0...

What is the Net Present Value of the following cash flow stream? Year Cash Flow 0 -$489 1 $363 2 $192 3 $161 4 $256 Assume an interest rate of 13% Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. If your answer is negative, enter your answer as a negative number rounded off to two decimal points.

Free cash flow valuation is one of the best methods to value a growing ______ company The...

Free cash flow valuation is one of the best methods to value a growing ______ company The time value of money requires that we compare amounts within ______ the same timeframe The value of a good in the finance world is the price you originally paid for it ______ In a bankruptcy, bond holders get paid before equity holders ______ The nominal interest rate = the real interest rate plus inflation ______ A partnership is a type of firm which is subject to double taxation ______...

eBook Problem 4-27 Present Value of a Perpetuity What is the present value of a perpetuity...

eBook Problem 4-27 Present Value of a Perpetuity What is the present value of a perpetuity of $400 per year if the appropriate discount rate is 10.92%? Round your answer to the nearest cent. $ If interest rates in general were to double and the appropriate discount rate rose to 21.84%, what would its present value be? Round your answer to the nearest cent. $

What’s the present value of a perpetuity that pays $1,000 per year beginning 1 year from...

What’s the present value of a perpetuity that pays $1,000 per year beginning 1 year from now, if the appropriate interest rate is 5%? What would the value be if payments on the annuity began immediately? ($20,000, $21,000. Hint: Just add the $1,000 to be received immediately to the value of the annuity.)

Consider a perpetuity with the first cash flow at the end of year 1. If the...

Consider a perpetuity with the first cash flow at the end of year 1. If the invested funds of the perpetuity could earn 11% per year and the perpetuity paid $467 per year, what is the present value of the perpetuity? (round to the nearest dollar)

Subjects