You will receive cash flows of $21.06 next year from a perpetuity. The perpetuity is indexed...
You will receive cash flows of $21.06 next year from a perpetuity. The perpetuity is indexed to inflation, π=2.2%, such that payments grow at 2.8% faster than inflation. If the interest rate is 3.6% per year, what is the PV of the perpetuity? Please show how to do it,
Homework Answers
The solution to the question is provided below for your reference.
Present Value of the perpetuity=21.06/(2.8%+2.2%-3.6%)=1504.29
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