Question

In evaluating a growing perpetuity investment with a value of 19800, what financial metrics or considerations should be taken into account?

Answer 1

In evaluating a growing perpetuity investment, the discount rate, expected growth rate, and alternative investments should be considered.

Step-by-step explanation:

In evaluating a growing perpetuity investment with a value of $19,800, there are several financial metrics and considerations that should be taken into account:

1. Discount rate: The discount rate is the rate of return required by an investor to justify the investment. It is used to calculate the present value of future cash flows. A higher discount rate will result in a lower present value and vice versa.
2. Expected growth rate: The expected growth rate is the rate at which the perpetuity investment is expected to grow over time. This growth rate is used to determine the future cash flows and calculate the present value.
3. Alternative investments: It is important to compare the perpetuity investment with other investment options to assess its relative attractiveness. This can be done by considering their potential returns, risks, and liquidity.