Question

In: Finance

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

Solutions

Expert Solution

PERPETUITY STARTS FROM END OF YEAR 2, SO PRESENT VALUE OF PERPETUITY WILL BE AVAILABLE AT THE END OF YEAR 1. SO

VALUE OF PERPETUITY 1 YEAR FROM TODAY = 1000/0.10 = 10000

VALUE OF PERPETUITY TODAY = 10000/(1+0.10) = 9090.91

ANSWER : 9090.91

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

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.)
What is the present value of $10,000 per year in perpetuity at an annual interest rate of 10 percent if the perpetuity starts in year=4?
What is the present value of $10,000 per year in perpetuity at an annual interest rate of 10 percent if the perpetuity starts in year=4? $10,000 $75,131.48 $1,000 $68,301.35 $82,402.36
Use the fact that the present value of a perpetuity paying $X per period starting in...
Use the fact that the present value of a perpetuity paying $X per period starting in one year is X/r, where r is the riskless rate of return, to determine the present value of annual payments of $X accruing for 20 years, starting one year from now. Hint: Think of it as a perpetuity less the appropriately discounted value of a perpetuity starting 20 years from now.
A perpetuity will pay $1,000 per year, starting eight years after the perpetuity is purchased. What...
A perpetuity will pay $1,000 per year, starting eight years after the perpetuity is purchased. What is the present value (in $) of this perpetuity on the date that it is purchased, given that the interest rate is 4%? (Round your answer to the nearest cent.) $
What is the present value of a perpetuity of $80 per year if the discount rate...
What is the present value of a perpetuity of $80 per year if the discount rate is 11%?
what is the present value of a perpetuity that pays $8.50 per year forever (at the...
what is the present value of a perpetuity that pays $8.50 per year forever (at the end of every year) if the appropriate discount rate is 7%
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
What is the present value of a constant perpetuity of 25 per year where the required...
What is the present value of a constant perpetuity of 25 per year where the required rate of return is 5%?
​ (Present value of a perpetuity​)  What is the present value of a ​$4,500 perpetuity discounted...
​ (Present value of a perpetuity​)  What is the present value of a ​$4,500 perpetuity discounted back to the present at 14 ​percent? The present value of the perpetuity is $(...)
7. What is present value of perpetuity of $100 per year if appropriate discount rate is...
7. What is present value of perpetuity of $100 per year if appropriate discount rate is 5%? If discount rate is increased to 15% what is the present value of the perpetuity?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT