Question

In: Finance

A perpetuity of $5,000 per year beginning two years from today offers a 15% annual return....

A perpetuity of $5,000 per year beginning two years from today offers a 15% annual return.

What is its present value?

Solutions

Expert Solution

value after year 2=Annual cash flows/annual return

=5000/0.15

=33333.3333

Hence present value=value after year 2*Present value of discounting factor(rate%,time period)

=33333.3333/1.15

=$28985.51(Approx).


Related Solutions

April Stigum will receive a 10-year annuity of $5,000 per year, beginning 5 years from today....
April Stigum will receive a 10-year annuity of $5,000 per year, beginning 5 years from today. In other words, the first payment will be made at the end of year 5. Assuming a required rate of return of 6%, calculate the present value today of her annuity. (Enter a positive value and round to 2 decimals).
If a loan shark offers to give you $5,000 today in return for$8,000 in three...
If a loan shark offers to give you $5,000 today in return for $8,000 in three weeks, what is the implied weekly compound interest rate?
Investment X offers to pay you $5,000 per year for nine years, whereas Investment Y offers...
Investment X offers to pay you $5,000 per year for nine years, whereas Investment Y offers to pay you $7,500 per year for five years. a. Calculate the present value for Investments X and Y if the discount rate is 5 percent. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. Calculate the present value for Investments X and Y if the discount rate is 15 percent. (Do not round intermediate calculations and...
What’s the present value of a perpetuity that pays $1,000 per year beginning 1 year from...
What’s the present value of a perpetuity that pays $1,000 per year beginning 1 year from now, if the appropriate interest rate is 5%? What would the value be if payments on the annuity began immediately? ($20,000, $21,000. Hint: Just add the $1,000 to be received immediately to the value of the annuity.)
(perpetuity) - first dividend of $10 per share is planned 3 years from today. - after...
(perpetuity) - first dividend of $10 per share is planned 3 years from today. - after that dividends will decline at 5% p.a. for next two years, and then grow at rate of 3% p.a. - dividends paid annualy - required rate of return is 0.5/fornight ask: how many shares need to sell to raise $500000
What is the present value of a perpetuity that starts paying exactly two years from now 1,000 per year?
What is the present value of a perpetuity that starts paying exactly two years from now 1,000 per year? Assume required rate of return is 10% $8,789.12 $10,000 $8,264.46 $9090.91
You want to quit your job and return to school for an MBA degree 3 years from now, and you plan to save $5,000 per year, beginning immediately.
Part A: You want to quit your job and return to school for an MBA degree 3 years from now, and you plan to save $5,000 per year, beginning immediately. You will make 3 deposits in an account that pays 5.2% interest. Under these assumptions, how much will you have 3 years from today?a. $16,614.78b. $17,943.97c. $17,445.52d. $18,442.41e. $14,953.30Part B: What is the PV of an annuity due with 5 payments of $7,900 at an interest rate of 5.5%?a. $41,285.20b....
An investment offers €10,000 per year for 15 years, with the first payment occurring one year...
An investment offers €10,000 per year for 15 years, with the first payment occurring one year from now. If the required return is 10 per cent, a) What is the value of the investment? b) What would the value be if the payments occurred for 50 years? c) For ever?
An investment offers $5,500 per year for 15 years, with the first payment occurring one year...
An investment offers $5,500 per year for 15 years, with the first payment occurring one year from today. If the required return is 6%, what is the present value of the investment?
A perpetuity will pay $1,025 per year, starting five years after the perpetuity is purchased
A perpetuity will pay $1,025 per year, starting five years after the perpetuity is purchased. What is the present value of this perpetuity on the date that it is purchased, given that the interest rate is 9%. Show your work or inputs.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT