Question

What is the present value (PV) today of a stable perpetuity that pays $11,000 every 3 years, starting 7 years from today? The appropriate annual discount rate is 12% p.a. Round your answer to the nearest dollar. Do not include the $ symbol nor the separating comma, if any Thus, for example, if the PV is $24,323 55 write 24324 in the answer box. IMPORTANT. Use at least 4 decimals in all your intermediate calculations In the case of a discount rate, the 4-decimal requirement applies to the percentage version; that is, the decimal version would have 6 decimals. For example, 12345% would become 0,012345. Write your answer rounded to the dollar, e.g., 6543 (Acceptable error = 200)

Answer 1

Present Value of a Perpetuity. Perpetuity is a perpetual annuity, it is a series of equal infinite cash flows that occur at the end of each period and there is equal interval of time between the cash flows. Present value of a perpetuity equals the periodic cash flow divided by the interest rate.