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An investment, which has an expected return of 11.43 percent, is expected to make annual cash...

An investment, which has an expected return of 11.43 percent, is expected to make annual cash flows forever. The first annual cash flow is expected in 1 year and all subsequent annual cash flows are expected to grow at a constant rate of 1.05 percent per year. The cash flow in 1 year from today is expected to be 19,090 dollars. What is the present value (as of today) of the cash flow that is expected to be made in 3 years?

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Answer #1

FVPVx(1+i/n)Ant Future value at year 3-FV- $19,090 x (1+1.05%)^(2) $19,492.99 PV: FV (1+i/n)Ant r rate per period t-years x compounding Present value- $14,088.74 $19,492.99 (1+11.43%)^(3)

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