The present value of a constant growth perpetuity is $100. If the perpetuity pays $5 next...

The present value of a constant growth perpetuity is $100. If the perpetuity pays $5 next year and the discount rate is 10%, by what rate is the perpetuity growing?

Expert Solution

Growth rate = Ke - (D1 / P0)

= 10% - ($5 / $100)

= 10% - 5%

= 5%

Growth rate = 5%

jeff jeffy answered 2 years ago

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