Final answer:
The present value of a $2,000 annual perpetuity at a 5% return rate is calculated using the perpetuity present value formula, giving a result of $40,000.00.
Step-by-step explanation:
The present value of an annual $2,000 perpetuity assuming a 5% required rate of return can be calculated using the perpetuity present value formula, which is: Present Value = Perpetuity Payment / Interest Rate. Given the perpetuity payment (PMT) is $2,000 and the interest rate (r) is 5%, or 0.05 when converted into decimal form, the present value (PV) can be calculated as follows:
PV = PMT / r = $2,000 / 0.05 = $40,000.00.
This means that option D is the correct value. Therefore, the final answer to the student's question is: The present value of a $2,000 perpetuity at a 5% rate is $40,000.00, which is option D.