please explain the ubderlined step and include the formula used to get there

3. A perpetuity-immediate pays 100 per year. Immediately after the fifth payment, the perpetuity is exchanged for a 25-year annuity-immediate that will pay X at the end of the first year. Each subsequent annual payment will be 8% greater than the preceding payment. The annual effective rate of interest is 8%. Calculate X. (A) 54 (B) 64 (C) 74 (D) 84 (E) 94 PV = 100 w =1250 - the present value of the original perpetuity immediately after the 5" 0.08 108 1. payment. The present value of the new 25 year annuity is X- 1.08 1.08 1.089 1.08 Equation of values: X 25 =1250, 1.08 X = 54 Answer: A Wh