Final answer:
The present value of Mark Weinstein's laser eye surgery technology with initial cash flow two years from today and subsequent growth, discounted at a 9% rate with a 3.6% growth in perpetuity, is $2,744,556.71.
Step-by-step explanation:
To calculate the present value of Mark Weinstein's technology for laser eye surgery with anticipated cash flows starting in future years, we need to use the present value of growing perpetuity formula. This is because the cash flows are expected to grow indefinitely at a constant rate. The formula we use is PV = C / (r - g), where PV is the present value, C is the initial cash flow, r is the discount rate, and g is the growth rate.
In this case, the first cash flow of $176,000 is received in two years, and we must discount it back to the present value. So, we take the cash flow and divide it by the discount rate of 9% minus the growth rate of 3.6%, which gives us the value as of the first time the cash flow is received. Next, because this cash flow is received two years from now, we need to discount that value back another year to get today's present value.
The discount rate is 9%, the growth rate is 3.6%, and the initial cash flow, C, is $176,000.
Finally, the present value calculation would then be:
P = $176,000 / (0.09 - 0.036)
P = $176,000 / 0.054
P = $3,259,259.26
Now we need to discount this amount back to the present because it is received two years from today. So, the present value (PV) today is:
PV = $3,259,259.26 / (1 + 0.09)²
PV = $3,259,259.26 / 1.1881
PV = $2,744,556.71