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w6 11/12 ​(Related to Checkpoint​ 6.5)  ​(Present value of a growing​ perpetuity)  What is the present...

w6 11/12 ​(Related to Checkpoint​ 6.5)  ​(Present value of a growing​ perpetuity)  What is the present value of a perpetual stream of cash flows that pays ​$2 comma 500 at the end of year one and the annual cash flows grow at a rate of 4​% per year​ indefinitely, if the appropriate discount rate is 13​%? What if the appropriate discount rate is 11​%?

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Answer #1
Present value of Growing perpetuity is = Annual cashflow/(Discount rate - Growth rate)
Present value of Growing perpetuity is = (2500/(13%-4%))
Present value of Growing perpetuity is = (2500/9%)
Present value of Growing perpetuity is = $ 27,777.78/. Approx.
If discount rate is 11%
Present value of Growing perpetuity is = (2500/(11%-4%))
Present value of Growing perpetuity is = (2500/7%)
Present value of Growing perpetuity is = $ 35,714.29/. Approx.
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