The following problem is similar, but not identical, to the second question in Problem 5.

What is the present value (PV) today of a growing perpetuity that starts at $47,000 1 year from today, and then grows at a 4% annual rate? The appropriate discount rate is 16% p.a. Round your answer to the nearest dollar. Do not include the $ symbol nor the separating comma, if any. Thus, for example, if the PV is $24,323.55 write 24324 in the answer box.

• The three problems in the text should be straightforward.
• Well also solve a more challenging set of problems in class. They pertain to perpetuities in which the periodic payments occur once every several years, and whose initial CF may occur at any time (i.e., it does not necessarily occur at t = 1).

Problem 5 - Perpetuities PV of perpetuity with $100,000/yr, starting in yr 1; r = 10% p.a. C = $ 100,000 10% PV = PV of growing perpetuity with D1 = $50,000, with g = 4% p.a., r= 10% p.a. D1 = $ g= 50,000 4% 10% PV = PV of perpetuity of $100,000/yr, starting in yr 5; r = 10% p.a. $ C = r = S = 100,000 10% 5 years PVS-1 = Note: PVS-1 is the PV of the perpetuity one period (i.e., 1 year in this problem) before the first payment PVO =