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(Related to Checkpoint 6.5) (Present value of a growing perpetuity) What is the present value of a perpetual stream of cash flows that pays $6,500 at the end of year one and the annual cash flows grow at a rate of 4% per year indefinitely, if the appropriate discount rate is 14%? What if the appropriate discount rate is 12%? a. If the appropriate discount rate is 14%, the present value of the growing perpetuity is $ b. If the appropriate discount rate is 12%, the present value of the growing perpetuity is $ (Round to the nearest cent.) (Round to the nearest cent.)

(Related to Checkpoint 6.5) (Present value of a growing perpetuity) What is the present value of a perpetual stream of cash flows that pays $6,500 at the end of year one and the annual cash flows grow at a rate of 4% per year indefinitely, if the appropriate discount rate is 14%? What if the appropriate discount rate is 12%? a. If the appropriate discount rate is 14%, the present value of the growing perpetuity is $ b. If the appropriate discount rate is 12%, the present value of the growing perpetuity is $ (Round to the nearest cent.) (Round to the nearest cent.)

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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unit 6-5

(Related to Checkpoint 6.5) (Present value of a growing perpetuity) What is the present value of a perpetual stream of cash flows that pays $6,500 at the end of year one and the annual cash flows grow at a rate of 4% per year indefinitely, if the appropriate discount rate is 14%? What if the appropriate discount rate is 12%? a. If the appropriate discount rate is 14%, the present value of the growing perpetuity is $ b. If the appropriate discount rate is 12%, the present value of the growing perpetuity is $ (Round to the nearest cent.) (Round to the nearest cent.)
Transcribed Image Text:(Related to Checkpoint 6.5) (Present value of a growing perpetuity) What is the present value of a perpetual stream of cash flows that pays $6,500 at the end of year one and the annual cash flows grow at a rate of 4% per year indefinitely, if the appropriate discount rate is 14%? What if the appropriate discount rate is 12%? a. If the appropriate discount rate is 14%, the present value of the growing perpetuity is $ b. If the appropriate discount rate is 12%, the present value of the growing perpetuity is $ (Round to the nearest cent.) (Round to the nearest cent.)
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