In: Finance
A perpetuity of $5,000 per year beginning two years from today offers a 15% annual return.
What is its present value?
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).