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please place the values into a Time value of money template provided. Put the numbers into a template. you can add more rows etc as
please place the values into a Time value of money template provided.
Put the numbers into a template. you can add more rows etc as needes.
Let's say ITech Geek Investors is considering investing in a real estate project that will generate a fixed annual cash flow of $10,000 for an indefinite period of time. Assuming a discount rate of 5%, we can calculate the present value of the perpetuity using formula (I):
PV = CF / r = $10,000 / 0.05 = $200,000
We can also calculate the present value of the first 10 years of cash flows using formula (II):
PV = sum(CF / (1 + r)^i) for i = 1 to 10
= $10,000 / (1 + 0.05)^1 + $10,000 / (1 + 0.05)^2 + ... + $10,000 / (1 + 0.05)^10
= $10,000 * (1 / 1.05 + 1 / 1.1025 + ... + 1 / 1.6289)
= $10,000 * 7.721
= $77,210
We can see that the present value of the first 10 years of cash flows is significantly less than the present value of the perpetuity. However, as we increase the number of years, the present value of the cash flows
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