Question

For computation of the present value of growing annuity with n periods, the cash flow for the current period is used and not the cash flow to be received in the next period. True False

Answer 1

True.

The following is the formula for knowing the present value of growing annuity:

P / (r-g) *[1- ((1+g) / (1+r))^n]

here,

P is the initial payment or payment in current period

r= rate per period.

g is the growth rate.

n is the number of periods.