(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 $2,500 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 13%? What if the appropriate discount rate is 11%?

(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 $2,500 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 13%? What if the appropriate discount rate is 11%?

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA3: Time Value Of Money

Section: Chapter Questions

Problem 12E

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Question content area top

Part 1

(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

$2,500

at the end of year one and the annual cash flows grow at a rate of

per year indefinitely, if the appropriate discount rate is

13%?

What if the appropriate discount rate is

11%?

Question content area bottom

Part 1

a. If the appropriate discount rate is

13%,

the present value of the growing perpetuity is

$enter your response here.

(Round to the nearest cent.)

Part 2

b. If the appropriate discount rate is

11%,

the present value of the growing perpetuity is

$enter your response here.

(Round to the nearest cent.)

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