A project yields an annual benefit of $25 a year, starting next year and continuing forever. What
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A project yields an annual benefit of $25 a year, starting next year and continuing forever. What is the present value of the benefits if the interest rate is 10 percent? [Hint: The infinite sum x x2 x3 . . . is equal to x /(1 x), where x is a number less than 1.] Generalize your answer to show that if the perpetual annual benefit is B and the interest rate is r , then the present value is B / r . JFF7
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