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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?

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Expert Solution

present value of perpetuity=Annual cash flows/discount rate

1.present value=100/0.05=$2,000

2.present value=100/0.15=$666.67(Approx).

jeff jeffy answered 2 years ago
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