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Find the present value of the given perpetuity. ​ $43200 per year at the rate of...

Find the present value of the given perpetuity. ​

$43200 per year at the rate of 6​% yearly

Solutions

Expert Solution

Perpetuity is a situation where you will receive cash flow for continues indefinitely.

Even if total value of perpetuity is infinite, it has limited present value. Present value of infinite cash flow will be calculated by adding up discounted value and decrease discounted value until it comes to zero.

Formula to calculate Present value of Perpetuity is as follows:

The value given in the question are:

Cash Flow per year = $43200

Rate of Interest = 6% p.a.

Using the value given in the question,

Present Value of Perpetuity is = $720,000

ekkarill92 answered 2 years ago
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