Bundle: Fundamentals of Financial Management, 14th + MindTap Finance, 1 term (6 months) Printed Access Card
Bundle: Fundamentals of Financial Management, 14th + MindTap Finance, 1 term (6 months) Printed Access Card
14th Edition
ISBN: 9781305777118
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Chapter 5, Problem 16P
Summary Introduction

To compute: Present value of $100 perpetuity, if the interest rate is 7% and 14%.

Perpetuity: It is a vital concept of corporate finance; it is that annuity, which has regular payment started on particular date and continues for indefinite period of time. It is important as it help in value of stocks, real state and other opportunities of investment.

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What is the present value of perpetuity of $100 per year if the appropriate discount rate is 7 percent? If interest rates in general were to double and the appropriate discount rate rose to 14 percent, what would happen to the present value of the perpetuity?
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Bundle: Fundamentals of Financial Management, 14th + MindTap Finance, 1 term (6 months) Printed Access Card

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