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You are evaluating a growing perpetuity investment from a large financial services firm. The investment promises...

You are evaluating a growing perpetuity investment from a large financial services firm. The investment promises an initial payment of $15,200 at the end of this year and subsequent payments that will grow at a rate of 2.3 percent annually. If you use a 9 percent discount rate for investments like this, what is the present value of this growing perpetuity? (Round answer to 2 decimal places, e.g. 15.25.)

Present value

Solutions

Expert Solution

Present value of this growing perpetuity=Cash flow at end of year/(Discount rate-Growth rate)

=15200/(0.09-0.023)

which is equal to

=$226865.67(Approx)

jeff jeffy answered 2 years ago
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