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lou are asked to find the present value of of receiving $45,000 each year forever, which grows by 1.5% each year (i.e. you receive $45,000
lou are asked to find the present value of of receiving $45,000 each year forever, which grows by 1.5% each year (i.e. you receive $45,000 in year 1,$45,0001.015 in year 2 , etc.)? The annual discount rate is 10%. Assume annual compounding. ANSWER FORMAT For answers referring to dollar amount, use no commas or dollar signs: 12345 (NOT $12,345 ) For answers referring to a percent, answer in decimal form: 0.05 (NOT 5\%) For answers referring to years, answer in whole numbers: 5 (NOT 5 years) Which of the formulas below would you use to solve this question? Use the number corresponding to the formula (i.e. 1, 2, 3, 4). 1. PV=(1+r)nFV 2. PV=rCF 3. PV=(rg)CF 4. PV=CF(r(1(1+r)n1)) What is the value for r that you would use? What is the value for n that you would use? If there is NO n, answer NO What is the value for CF or FV that you would use? What is the value of g that you would use? If there is NOg, answer NO
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