What is the present value of a perpetual stream of cash flows that pays $1000 at the end of year one and the annual cash flows grows at a rate of 4% per year indefinitely, if the appropriate discount rate is 8%?

(Present value on a growing perpetuity). What is the present value of a perpetual stream of cash flows that pays $1000 at the end of year one and the annual cash flows grows at a rate of 4% per year indefinitely, if the appropriate discount rate is 8%? What if the appropriate discount rate is 6%?

a). If the appropriate discount rate is 8%, the present value of the growing perpetuity is? $ (round to the nearest cent)

b). If the appropriate discount rate is 6%, the present value of the growing perpetuity is? $ (round to the nearest cent)

Expert Solution

Present value of perpetuity=Cash flow at end of year one/(Discount rate-Growth rate)

a.Present value of perpetuity=1000/(0.08-0.04)

=$25,000

b.Present value of perpetuity=1000/(0.06-0.04)

=$50,000

jeff jeffy answered 2 years ago

What is the present value of a perpetual stream of cash flows that pays $4500 at...

What is the present value of a perpetual stream of cash flows that pays $4500 at the end of year one and the annual cash flows grow at a rate of 4% per year indefinitely, if the appropriate discount rate is 8%? What if the appropriate discount rate is 6%?

What is the present value of a perpetual stream of cash flows that pays $3,500 at...

What is the present value of a perpetual stream of cash flows that pays $3,500 at the end of year one and the annual cash flows grow at a rate of 4% per year indefinitely, if the appropriate discount rate is 8%? What if the appropriate discount rate is 6%? Q). a. If the appropriate discount rate is 8%, the present value of the growing perpetuity is __ (Round to the nearest cent) Please show your work.

What is the present value of a perpetual stream of cash flows that pays $5 comma...

What is the present value of a perpetual stream of cash flows that pays $5 comma 500 at the end of year one and the annual cash flows grow at a rate of 3% per year indefinitely, if the appropriate discount rate is 14%? What if the appropriate discount rate is 12%? a.If the appropriate discount rate is 14%, the present value of the growing perpetuity is $_____. (Round to the nearest cent.) b.If the appropriate discount rate is...

If the appropriate discount rate for the following cash flows is 11.7 percent per year, what is the present value of the cash flows?

If the appropriate discount rate for the following cash flows is 11.7 percent per year, what is the present value of the cash flows?YearCash Flow1$21,6002$25,9003$38,7004$16,200 Group of answer choices$71,407.19$74,221.80$78,270.77$80,407.16$81,121.03

Find the present value of the following cash flows. A perpetual stream of consecutive annual payments...

Find the present value of the following cash flows. A perpetual stream of consecutive annual payments (made at year-end) of $800, which starts at the end of year 5 and grows by 6% per year forever. Discount rate is 10%.

a) What is the present value of $1,200 per year, at a discount rate of 8...

a) What is the present value of $1,200 per year, at a discount rate of 8 percent, if the first payment is received 9 years from now and the last payment is received 28 years from now? b) ABC Co. wants to sell you an annuity that will pay you $500 per quarter for 25 years. You want to earn a minimum rate of return of 5.1 percent. What is the most you are willing to pay today to buy...

What is the present value of $2,625 per year at a discount rate of 8%, if...

What is the present value of $2,625 per year at a discount rate of 8%, if the first payment is received six years from now and the last payment is received 20 years from now? PLEASE USE excel

Determine the present value of the mixed stream of cash flows using a 6% discount rate....

Determine the present value of the mixed stream of cash flows using a 6% discount rate. DO not place a $ sign front of the number and use 2 decimals. For example 1234.56 CF1 $900 CF2 $800 CF3 $1200 CF4 $1600 CF5 $1900

Find the present value of the following cash flow stream assuming a discount rate of 8%:...

Find the present value of the following cash flow stream assuming a discount rate of 8%: A payment of $10,000 received at the end of each MONTH over the coming 4 years, followed by a payment of $5000 received at the end of each MONTH over the 6 years after that. a.) $556,975.15 b.) $409,619.13 c.) $285,172.61 d.) $207,297.84 e.) $616,916.97

a. What is the present value of end-of-year cash flows of $7,000 per year, with the...

a. What is the present value of end-of-year cash flows of $7,000 per year, with the first cash flow received five years from today and the last one 40 years from today? Assume interest rate of 10%. $41,271.67 $44,496.49 $45,733.15 $46,264.30 $50,218.30 b. What is the value of a 30-year annuity that pays $1250 a year? The annuity’s first payment will be received on year 11. Also, assume that the annual interest rate is 6 percent for years 1 through...

Question