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(Related to Checkpoint 6.5)(Present value of a growing perpetuity)What is the present value of a perpetual stream of cash flows that pays $5 comma 500
(Related to Checkpoint 6.5)(Present value of a growing perpetuity)What is the present value of a perpetual stream of cash flows that pays
$5 comma 500
at the end of year one and the annual cash flows grow at a rate of
2
%
per year indefinitely, if the appropriate discount rate is
9
%?
What if the appropriate discount rate is
7
%?
a.If the appropriate discount rate is
9
%,
the present value of the growing perpetuity is
$nothing
.
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