Present value of a growing​ perpetuity)  What is the present value of a perpetual stream of cash flows that pays $10,000 at the end of year one and then grows at a rate of 4​% per year​ indefinitely? The rate of interest used to discount the cash flows is 12​%.

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Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.