Cash floe = $6,500
Growth rate = 4%
Discount rate = 11%
Present value o Perpetuity = Cash flow * (1 + g) / (Ke - g)
Present value o Perpetuity = $6,500 * (1 + 0.04) / (0.11 - 0.04)
Present value o Perpetuity = $96,571.43
If discount rate is 9%
Then Present value o Perpetuity = 6,500 * 1.04 / (0.09 - 0.04)
Present value o Perpetuity = $135,200
(Related to Checkpoint 6.5) (Present value of a growing perpetuity) What is the present value of...
(Related to Checkpoint 6.5 Present value of a growing perpetuity What is the present value o a perpetual stream o cash flows hat pays $6,500 at the end o year one and he annual cash flows grow at a rate o 2% per year indefinitely, if the appropriate discount rate is 12%? what if the appropriate discount rate is 10%? a f the appropriate discount rate is 12%, the present value of the growing perpetuity is S Round to the...
(Present value of a growing perpetuity) What is the present value of a perpetual stream of cash flows that pays $3,500 at the end of year one and the annual cash flows grow at a rate of 4% per year indefinitely, if the appropriate discount rate is 10%? What if the appropriate discount rate is 8%?
What is the present value of a perpetual stream of cash flows that pays $2, 000 at the end of year one and the annual cash flows grow at a rate of 2% per year indefinitely, if the appropriate discount rate is 8%? What if the appropriate discount rate is 6%? a. If the appropriate discount rate is 8%, the present value of the growing perpetuity is $ nothing. (Round to the nearest cent.)
Q 42,43,44,45,47 CHAPTER 6 The Time Value of Money 219 Perpetulties 6-42. Calculating the present value of a perpetuity) (Related to Checkpoint page 206) What is the present value of the following? a. A $300 perpetuity discounted back to the present at 8 percent b. A $1,000 perpetuity discounted back to the present at 12 percent C. A $100 perpetuity discounted back to the present at 9 percent d. A $95 perpetuity discounted back to the present at 5 percent...
What is the present value of a perpetual stream of cash flows that pays $6,000 at the end of year one and the annual cash flows grow at a rate of 3% per year indefinitely, if the appropriate discount rate is 12%? What if the appropriate discount rate is 10%?
6-43. (Calculating the present value of a perpetuity) What will be the present value of a tual paym perpe will be its value if the discount rate is changed to 3 percent? ent of £400 per year if the applicable discount rate is 6 percent? What it Related to Checkpoint 6.5
(Related to Checkpoint 6.2) (Present value of annuity payments) The state lottery's million-dollar payout provides for $1.11.1 million to be paid in 2525 installments of $44 comma 00044,000 per payment. The first $44 comma 00044,000 payment is made immediately, and the 2424 remaining $44 comma 00044,000 payments occur at the end of each of the next 2424 years. If 77 percent is the discount rate, what is the present value of this stream of cash flows? If 1414 percent is...
Calculate the present value of a growing perpetuity with the first cash flow (occurring in one year) being $10 million and every subsequent year’s cash flow growing at a constant 6% rate (i.e, the cash flow at the end of two years is $10M(1.06) = $10.6 million, the cash flow at the end of three years is 10M(1.06)^2 = $11.236 million, etc.). The cost of capital for this calculation is 12%. The firm has to spend $50 million immediately and...
Problem 6.18 You are evaluating a growing perpetuity investment from a large financial services firm. The investment promises an initial payment of $20,100 at the end of this year and subsequent payments that will grow at a rate of 3.4 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
You are evaluating an investment that will pay $70 in 1 year, and it will continue to make payments at annual intervals thereafter, but the payments will grow by 3% forever. a. What is the present value of the first $70 payment if the discount rate is 11%? b. How much cash will this investment pay 100 years from now? What is the present value of the 100th payment? Again use a 11% discount rate. c. What is the present...