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).

jeff jeffy answered 1 year ago

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