Answer:
PV= $711,111.11
Step-by-step explanation:
Giving the following information:
Cash flow (Cf)= $32,000
Annual growth (g)= 2.75%
Interest rate (i)= 7.25%
To calculate the present value (the amount that you are willing to pay), we need to use the following formula:
PV= Cf / (i - g)
PV= 32,000 / (0.0725 - 0.0275)
PV= $711,111.11