Mark Weinstein has been working on an advanced technology in laser eye surgery. His technology will be available in the near term. He anticipates his first annual cash flow from the technology to be $177,000, received two years from today. Subsequent annual cash flows will grow at 3.7 percent in perpetuity.  What is the present value of the technology if the discount rate is 11 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

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Asked Sep 30, 2019
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Mark Weinstein has been working on an advanced technology in laser eye surgery. His technology will be available in the near term. He anticipates his first annual cash flow from the technology to be $177,000, received two years from today. Subsequent annual cash flows will grow at 3.7 percent in perpetuity.

  

What is the present value of the technology if the discount rate is 11 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

 

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Expert Answer

Step 1

Calculation of Present Value:

The Present Value: of technology is $2,184,376.16.

Excel Spreadsheet:

...
1
Annual Cash Flows
$177,000
2 Discount Rate
11%
3 Growth Rate
3.70%
4 Number of Years
5 Growth of Cash Flows $2,424,657.53
1
|$2,184,376.16
6
Present Value
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1 Annual Cash Flows $177,000 2 Discount Rate 11% 3 Growth Rate 3.70% 4 Number of Years 5 Growth of Cash Flows $2,424,657.53 1 |$2,184,376.16 6 Present Value

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