In: Finance
Answer :-
First solve for the Present Value of a perpetual stream of $3700 payments, using a discount rate of 6.95%.
This calculation is pretty simple as the formula is:
Payment Amount / Interest rate
In this case it is:
$3700 / .0695 = $53,237.41
That formula is
FV / (1 + i)^n, where
FV = $53,237.41
i = .0695
n = 9
$53237.41 / 1.0695^9 = $ 27,190 Ans....