consider a financial asset that pays a perpetuity of $600 per year, starting one year from...

consider a financial asset that pays a perpetuity of $600 per year, starting one year from now. The discount rate is 9%. If the required investment today is $4000, what is the net present value of the investment

Solutions

Expert Solution

Present Value of annual cash flows		$ 6,666.67
Less:Investment		$ 4,000.00

Net Present Value of the investment		$ 2,666.67

Working:

Present Value of annual cash flows	=	Annual cash flows/discount rate
	=	$ 600.00	/	9%
	=	$ 6,666.67

jeff jeffy answered 1 year ago

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