Question

If you are willing to pay $43,582.00 today to receive $4,394.00 per year forever then your required rate of return must be ____%. Assume the first payment is received one year from today.

If you are willing to pay $23,417.00 today to receive a perpetuity with the first payment occurring next year then the payment must be $______. Assume a 6.00% discount rate.

Answer 1

If you are willing to pay $43,582.00 today to receive $4,394.00 per year forever then your required rate of return must be 10.10%. Assume the first payment is received one year from today.

If you are willing to pay $23,417.00 today to receive a perpetuity with the first payment occurring next year then the payment must be $1,405.02. Assume a 6.00% discount rate.