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The interest rate is 10% but the government offers you a subsidized perpetual loan for $1M at 5%. In other words, you get the $1M
The interest rate is 10% but the government offers you a subsidized perpetual loan for $1M at 5%. In other words, you get the $1M today and, in return, you pay the government $50,000 a year forever (you a re immortal). How much is this subsidy worth?
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To calculate the value of the subsidy we need to determine the present value of the perpetuity ...
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Advanced Accounting
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
10th edition
0-07-794127-6, 978-0-07-79412, 978-0077431808
