isabelaparis161 isabelaparis161
  • 06-02-2020
  • Business
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What is the present value of a perpetuity that makes annual payments of $10,000 at 4% compounded annually? (round your answer to the nearest dollar)

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hyderali230
hyderali230 hyderali230
  • 06-02-2020

Answer:

Present Value of Perpetuity is $25,000

Explanation:

Cash flow = $10,000

Interest rate / Yield = 4%

Present Value of Perpetuity = Cash flows / interest Rate or Yield

Present Value of Perpetuity = $10,000 / 4%

Present Value of Perpetuity = $10,000 / 0.04

Present Value of Perpetuity = $25,000

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