A perpetuity that pays annual cash flow has a value of $20,000 today. If the interest...

A perpetuity that pays annual cash flow has a value of $20,000 today. If the interest rate is 6%, how much will the perpetuity pay every year? Assume first cash flow occurs at the end of the first year.

Group of answer choices

$ 840

$ 720

$ 600

$ 333

$ 1200

$ 960

Expert Solution

Present Value of Perpetuity = Cash flow / Interest Rate

$20,000 = Cash flow / 0.06

Cash flow = $20,000 * 0.06

Cash flow = $1200

jeff jeffy answered 2 years ago

The present value, today, of the terminal (perpetuity) value equity cash flow that begins in 7...

The present value, today, of the terminal (perpetuity) value equity cash flow that begins in 7 years is $6,700,000 assuming a cost of equity equal to 8%. The year 7 free cash flow (beginning of the growing perpetuity) is $550,000. What is the growth rate required for the continuation value (terminal value perpetuity) term? Use the mid-year discounting convention. A 2.83 b. 2.62% c. 3.14% d. 3.56%

1. A Life Insurance company offers a perpetuity that pays annual payments of $20,000. This contract...

1. A Life Insurance company offers a perpetuity that pays annual payments of $20,000. This contract sells for $320,000 today. What is the interest rate? 2. Noly Corp. issued preferred stock at $1,000 with a 5.8% dividend. The current rate of return investors require is 6.0%. What is the maximum price investors would be willing to buy for the preferred stock? 3. Crinkle Inc. is selling a product that it expects will generate cash flows of $715,000 every year. The...

An investor is considering an investment that pays a cash flow of $200 annually in perpetuity....

An investor is considering an investment that pays a cash flow of $200 annually in perpetuity. The first cash flow is in the 4th year. If the interest rate is 12%, what is the present value of this investment? (round your final answer to the nearest dollar) What is the present value of a security that will pay $30,000 in 20 years if securities of equal risk pay 5% annually? Assume annual compounding. (round to the nearest dollar and do...

What is the value of an annual equivalent series for this cash flow using an interest...

What is the value of an annual equivalent series for this cash flow using an interest rate of 7%? Years; 1,2 = $325, years 3,4= $275, years 5, 6 = $185?

Urgently required. What is the present value (PV) today of a stable perpetuity that pays $11,000...

Urgently required. What is the present value (PV) today of a stable perpetuity that pays $11,000 every 3 years, starting 7 years from today? The appropriate annual discount rate is 12% p.a. Round your answer to the nearest dollar. Do not include the $ symbol nor the separating comma, if any Thus, for example, if the PV is $24,323 55 write 24324 in the answer box. IMPORTANT. Use at least 4 decimals in all your intermediate calculations In the case...

What is the present value of a growing perpetuity that has an initial payment of $20,000...

What is the present value of a growing perpetuity that has an initial payment of $20,000 one year from now. Assume a growth rate of 5% and a rate of return equal to 9%. Question options: $50,000.00 $500,000.00 $222,222,22 $400,000.00

An annuity in perpetuity with effective annual interest rate i > 0 has present value $90....

An annuity in perpetuity with effective annual interest rate i > 0 has present value $90. The annuity pays $30 at the end of each 5 year period, with the first payment at the end of year 10. Find i. please dont solve using excel

At an annual interest rate of i, i ≥ 0, the present value of a perpetuity...

At an annual interest rate of i, i ≥ 0, the present value of a perpetuity paying 10 at the end of each three-year period, with the first payment at the end of year 3, is 34.21. At the same annual effective rate of i, the present value of a perpetuity paying 1 at the end of each four-month period, with the first payment at the end of four months, is X. Calculate X.

The present value of a perpetuity, with the first cash flow paid in 4 years time,...

The present value of a perpetuity, with the first cash flow paid in 4 years time, is equivalent to receiving $100,000 in 15 years time. The perpetuity and the lump sum are of equivalent risk and have a required rate of return of 10%. What is the annual cash flow associated with the perpetuity?

The present value of a perpetuity, with the first cash flow paid in 5 years’ time,...

The present value of a perpetuity, with the first cash flow paid in 5 years’ time, is equivalent to the present value of $150,000 that is to be paid in 14 years’ time. The perpetuity and the lump sum have a required rate of return of 10%. What is the annual cash flow associated with the perpetuity? a. 6,361.46 b. 5,783.15 c. 6,997.61 d. 7697.37 e. None of above

Question