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PLEASE ANSWER WHAT THE QUESTION ASKS FOR. THIS IS MY SECOND TIME POSTING THIS We know that the present value at t = 0 of
PLEASE ANSWER WHAT THE QUESTION ASKS FOR. THIS IS MY SECOND TIME POSTING THIS
We know that the present value at t = 0 of a perpetuity that pays C every period forever (with the first payment at t = 1) is C/r, where r is the periodic effective interest rate. Using the above fact, derive a formula for the present value of C at t = 1, 2C at t = 2, 3C at t = 3, KC at t=K, ... on up to infinity. This cash flow is the same as one perpetuity that pays C, starting at t = 1, plus another perpetuity that pays C starting at t = 2, plus another perpetuity that pays C starting at t = 3, etc..., onto infinity. Thus, the present value of this cash flow can be calculated as the present value of future present values of future perpetuitiesStep by Step Solution
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