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what is present value of perpetuity if annual coupon is $1,000 and discount rate is 10%

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 23E: Assume that an investment of 100,000 produces a net cash flow of 60,000 per year for two years. The...

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what is present value of perpetuity if annual coupon is $1,000 and discount rate is 10%

Expert Solution

Step 1 - Summary Introduction:

Present value (PV) is the current value of a future sum of money or a stream of cash flows, given a specified rate of return. Future cash flows are discounted at the discount rate, and the higher the discount rate, the lower the present value of the future cash flows.

Present Value=FV/(1+r)^n

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