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Your grandfather is retiring at the end of next year. He would like to ensure that...

Your grandfather is retiring at the end of next year. He would like to ensure that his heirs receive payments of $10,300 a year forever, starting when he retires. If he can earn 8.9 percent annually, how much does your grandfather need to invest to produce the desired cash flow? (Round answer to 2 decimal places e.g. 15.25.)

Present Value of Investment = $

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Answer #1

Calculate the present value of the perpetuity as follows:

Present value = Payments / Rate

Present value = $10,300 / 8.9%

Present value = $115,730.34.

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