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What is the present value of a perpetual stream of cash flows that pays $5,500 at...

What is the present value of a perpetual stream of cash flows that pays $5,500 at the end of the year one and the annual cash flows grow at a rate of 2% per year indefinitely, if the appropriate discount rate is 13%? What if the appropriate discount rate is 11%?
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Answer #2
Present value of perpetual cash flows = C1/(Ke-g) Where,
= 5500/(13%-2%) C1 Cash flows at end of Year 1
= $ 50,000.00 Ke Discount rate
g Growth rate
Present value of perpetual cash flows = C1/(Ke-g) Where,
= 5500/(11%-2%) C1 Cash flows at end of Year 1
= $ 61,111.11 Ke Discount rate
g Growth rate
answered by: anonymous
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