At a discount rate of 11.00%, find the present value of a perpetual payment of $6,500 per year.

At a discount rate of 11.00%, find the present value of a perpetual payment of $6,500 per year. If the discount rate were lowered to 5.50%, half the initial rate, what would be the value of the perpetuity?

a. If the discount rate were 11.00%, the present value of the perpetuity is (Round to the nearest cent )

Solutions

Expert Solution

Present value of perpetuity=Annual cash flows/discount rate

1.Present value=(6500/0.11)=$59090.91(Approx).

2.Present value=(6500/0.055)=$118,181.82(Approx).

jeff jeffy answered 1 year ago

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