Given a discount rate of 4.8 percent per year, what is the value at Year 10...

Question

Question

Given a discount rate of 4.8 percent per year, what is the value at Year 10 of a perpetual stream of $3,200 annual payments t

business finance

Answer 1

Answer #1

Solution:-

Perpetuity value of the cash flow stream at year 20 = $3,200/4.8% = $66,666.67

Perpetuity value of the cash flow stream at year 10 = $66,666.67*(PV factor 10 years)

Perpetuity value of the cash flow stream at year 10 = $66,666.67*[(1/(1.048)¹⁰]= $66,666.67

Perpetuity value of the cash flow stream at year 10 = $66,666.67*[0.626]= $41,715.35

Answer 2

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