What is the present value of a $45 perpetuity discounted back to the present at 12 percent?

(Present value of a perpetuity) What is the present value of a $45 perpetuity discounted back to the present at 12 percent? The present value of the perpetuity is $ (Round to the nearest cent.)

Expert Solution

Present Value of a perpetuity is given by following formula :

Present Value of perpetuity = A / r

Where,

A = Periodic cash flow = $45

r = Interest rate = 12% or 0.12

So, Present value of the perpetuity

= $45 / 0.12

= $375.0

jeff jeffy answered 2 years ago

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