Question

Compute the present value of a perpetuity that pays $ 13,385 annually given a required rate of return of 9 percent per annum. (Round your answer to 2 decimal places; record your answer without commas and without a dollar sign).

Answer 1

The present value of perpetuity is $148,722.22

Step-by-step explanation:

A perpetuity is a series of equal cash flows that are paid after equal intervals of time for an infinite period of time. The present value of a perpetuity can be calculated using the following formula:

Present Value of perpetuity = Cash Flow / r

Where,

• r is the required rate of return.

Present value of perpetuity = 13385 / 0.09

Present value of perpetuity = $148,722.22