Question

n investment offers $8,700 per year for 17 years, with the first payment occurring one year...

n investment offers $8,700 per year for 17 years, with the first payment occurring one year from now. Assume the required return is 11 percent. What would the value be if the payments occurred forever?

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Answer #1
When annual payment received forever
Annual payment 8700
Rate of return 11%
Period Perpetuity
Therefore,
value of investment = 8700/11% = $ 79090.91
Note:
value of investment when annual payment received for 17 yrs
Annual payment 8700
Rate of return 11%
Annuity PVf at 11% for 17 years 7.54879
Value of investment 65674.47
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