Question

You are supposed to receive $ 6,000 per year forever and it grows by 5% per...

You are supposed to receive $ 6,000 per year forever and it grows by 5% per year. If the discount rate is 11% and the first cashflow will be started after 5 years, what is the present value of these cashflows?

$ 65,873.1

$ 59,345.13

$ 100,000

$ 73,119.14
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
Calculation of present value of perpetuity cash flow
Present value Cash flow + Cash flow*(1+g)/(Discount rate - Growth rate)
Present value 6000 + (6000*1.05)/(0.11-0.05)
Present value 6000+105000
Present value $111,000
Value today of future cash flow of $111,000
Present value 111000*(1/(1.11^5))
Present value 111000*0.593451
Present value $65,873.10
Thus, present value of these cash flows is $65,873.1
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
You are offered the right to receive $1000 per year forever, starting in one year. If...
You are offered the right to receive $1000 per year forever, starting in one year. If your discount rate is 5%, what is the pattern of this cash flow (annuity, perpetuity, growing annuity, or growing perpetuity)? How much is this offer worth to you?
You have just won the lottery and will receive $650,000 in one year. You will receive...
You have just won the lottery and will receive $650,000 in one year. You will receive payments for 15 years, and the payments will increase 4 percent per year. If the appropriate discount rate is 11 percent, what is the present value of your winnings?
Investment X offers to pay you $6,000 per year for nine years, whereas Investment Y offers...
Investment X offers to pay you $6,000 per year for nine years, whereas Investment Y offers to pay you $8,000 per year for six years. Which of these cash flow streams has the higher present value if the discount rate is 5%? If the discount rate is 22
You have just won the lottery and will receive $600,000 in one year. You will receive...
You have just won the lottery and will receive $600,000 in one year. You will receive payments for 16 years, and the payments will increase 5 percent per year. If the appropriate discount rate is 12 percent, what is the present value of your winnings?
What is the present value of an annuity of $6,000 per year, with the first cash...
What is the present value of an annuity of $6,000 per year, with the first cash flow received three years from today and the last one received 25 years from today? Use a discount rate of 7 percent. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)      Present value $   
Suppose that a firm just paid an annual dividend of $1.20 per share. This grows at...
Suppose that a firm just paid an annual dividend of $1.20 per share. This grows at 10% per year for each of the next two years, after which it will grow at 3% per year forever. The market risk premium is 7%. The firm has a tax rate of 25%, cost of debt is 6%, market value based D/E is 0.5, ROE is 12%, beta is 1.5, Rf is 4%. Using the dividend discount model, a) What discount rate will...
You have just won the lottery and will receive $620,000 in one year. You will receive...
You have just won the lottery and will receive $620,000 in one year. You will receive payments for 15 years, which will increase 3 percent per year. The appropriate discount rate is 12 percent. Required: What is the present value of your winnings?
You have just won the lottery and will receive $640,000 in one year. You will receive...
You have just won the lottery and will receive $640,000 in one year. You will receive payments for 23 years, which will increase 4 percent per year. The appropriate discount rate is 10 percent. Required: What is the present value of your winnings?
What discount rate would make you indifferent between receiving $3,566.00 per year forever and $5,964.00 per...
What discount rate would make you indifferent between receiving $3,566.00 per year forever and $5,964.00 per year for 28.00 years? Assume the first payment of both cash flow streams occurs in one year.
What discount rate would make you indifferent between receiving $3,139.00 per year forever and $5,052.00 per...
What discount rate would make you indifferent between receiving $3,139.00 per year forever and $5,052.00 per year for 29.00 years? Assume the first payment of both cash flow streams occurs in one year.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT