You are considering a new business venture and want to determine the present value of seasonal cash
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You are considering a new business venture and want to determine the present value of seasonal cash flows. Historical data suggest that quarterly flows will be $3,000 in quarter 1, $4,000 in quarter 2, $5,000 in quarter 3, and $6,000 in quarter 4. The annualized rate is 10 percent, compounded annually.
a. What is the PV if this quarterly pattern will continue into the future (that is, forever)?
b. How would your answer change if same quarter growth is 1 percent per year in perpetuity?
c. How would your answer change if this 1 percent growth lasts only 10 years?
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Financial Markets And Corporate Strategy
ISBN: 9780077119027
1st Edition
Authors: David Hillier, Mark Grinblatt, Sheridan Titman
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