Question
A friend who owns a perpetuity that promises to pay 1,000 at the end of each year, forever, comes to you and offers to sell
A friend who owns a perpetuity that promises to pay 1,000 at the end of each year, forever, comes to you and offers to sell you all of the payments to be received after the 25th year for a price of 1,000.
(i) Calculate the profitability index (PI) of investment. (ii) What do you know about the investment's net present value (NPV) and its internal rate of return (IRR)?
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Investment Analysis And Portfolio Management
Authors: Frank K. Reilly, Peggy L. Hedges, Philip Chang, Keith C. Brown, Hedges Reilly Brown
1st Canadian Edition
0176500693, 978-0176500696
