An investment requires 15,000 today and produces a yearly cash flow of 700 in perpetuity. Cash flow is expected to grow at 3% a year. What is the rate of return on this investment?

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 27P
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An investment requires 15,000 today and produces a yearly cash flow of 700 in perpetuity. Cash flow is expected to grow at 3% a year. What is the rate of return on this investment?

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Given:

Here,

Investment today is 15,000

Yearly Cash Flow is 700 in perpetuity

Growth Rate is 3%

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