Question

A perpetuity is having steady cash flow. Year 1 payment is $1,000 and it will continue...

A perpetuity is having steady cash flow. Year 1 payment is $1,000 and it will continue to go for forever on a yearly basis. What is the present value of this perpetuity at 10% rate.

0 0
Add a comment Improve this question Transcribed image text
Answer #1

What is the present value of this perpetuity at 10% rate.

=CF/R

=1000/10%

=10000

THE ABOVE IS ANSWER..

Add a comment
Know the answer?
Add Answer to:
A perpetuity is having steady cash flow. Year 1 payment is $1,000 and it will continue...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • When calculating a growing perpetuity, the growth rate is expected to continue forever. Therefore it should...

    When calculating a growing perpetuity, the growth rate is expected to continue forever. Therefore it should not exceed... a. the growth rate of the population in the economy. b. the growth rate of productivity in the economy. c. the growth rate of the general economy (growth in real GDP). d. the return on a large portfolio of stocks from the economy. What is the present value of a growing perpetuity with an expected cash flow of 1,000 next year, a...

  • A rich relative has bequeathed you a growing perpetuity. The first payment will occur one year...

    A rich relative has bequeathed you a growing perpetuity. The first payment will occur one year from now and will be $1,000. Each year after that, you will receive a payment on the anniversary of the previous payment that is 8% larger than the previous payment. This pattern of payments will go on forever. Assume that the interest rate is 12% per year. a) What is today’s value of the bequest? b) What is the value of the bequest immediately...

  • Dake is receiving a perpetuity due with annual payments. The payments are $1,000 at the beginning...

    Dake is receiving a perpetuity due with annual payments. The payments are $1,000 at the beginning of each year except the payment at the beginning of every fifth year is $6,000. In other words, the first four payments at $1,000 with the fifth payment being $6,000. This is followed by four more payments of $1,000 and then a fifth payment of $6,000. This pattern continues forever. Using an annual effective interest rate of 8%. Calculate the present value of this...

  • A rich relative has bequeathed you a growing perpetuity. The first payment will occur in a...

    A rich relative has bequeathed you a growing perpetuity. The first payment will occur in a year and will be $ 1 comma 000$1,000. Each year after​ that, you will receive a payment on the anniversary of the last payment that is nbsp 3 % 3% larger than the last payment. This pattern of payments will go on forever. Assume that the interest rate is 12 %12% per year. a. What is​ today's value of the​ bequest? b. What is...

  • A rich relative has bequeathed you a growing perpetuity. The first payment will occur in a...

    A rich relative has bequeathed you a growing perpetuity. The first payment will occur in a year and will be $ 1,000. Each year after that, you will receive a payment on the anniversary of the last payment that is nbsp 7 % larger than the last payment. This pattern of payments will go on forever. Assume that the interest rate is 15 % per year. a. What is today's value of the bequest? (Round to the nearest cent.) b....

  • A bond pays coupon payment of $100 per year and continue forever, required rate of return...

    A bond pays coupon payment of $100 per year and continue forever, required rate of return is 10% and the growth rate of cash flow is 5%. What’s the value of this bond? You should provide all the calculation process and formulas.

  • rich relative has bequeathed you a growing perpetuity. The first payment will occur in a year...

    rich relative has bequeathed you a growing perpetuity. The first payment will occur in a year and will be $ 3 comma 000$3,000. Each year after​ that, you will receive a payment on the anniversary of the last payment that is nbsp 3 % 3% larger than the last payment. This pattern of payments will go on forever. Assume that the interest rate is 14 %14% per year. a. What is​ today's value of the​ bequest? b. What is the...

  • A rich relative has bequeathed you a growing perpetuity. The first payment will occur in a...

    A rich relative has bequeathed you a growing perpetuity. The first payment will occur in a year and will be $1,000. Each year after that, you will receive a payment on the anniversary of the last payment that is 2% larger than the last payment. This pattern of payments will go on forever. Assume that the interest rate is 14% per year. a. What is today's value of the bequest? b. What is the value of the bequest immediately after...

  • You are evaluating an investment that will pay ​$70 in 1​ year, and it will continue...

    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...

  • You are evaluating an investment that will pay ​$80 in 1​ year, and it will continue...

    You are evaluating an investment that will pay ​$80 in 1​ year, and it will continue to make payments at annual intervals​ thereafter, but the payments will grow by 5% forever. a. What is the present value of the first ​$80 payment if the discount rate is 12%? b. How much cash will this investment pay 100 years from​ now? What is the present value of the 100th​ payment? Again use a 12​% discount rate. c. What is the present...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT