Ask Question
BusinessBusiness
2 June, 10:53

You are offered the right to receive $1000 per year forever, starting in one year. If your discount rate is 5%, what is this offer worth to you

+5
Answers (1)
  1. 2 June, 11:11
    0
    Worth of the offer = $20,000

    Explanation:

    The worth of this offer is the present value of the annual cash inflow receivable forever discounted at the given interest rate. The cash inflow receivable forever is known as a perpetuity

    The present of a cash inflow receivable forever is given below:

    PV = A * 1/r

    A - annual cash inflow, r - discount rate, PV - Present value of a perpetuity

    A - 1,000, r - 5%

    PV = 1,000 * 1/0.05

    PV = $20,000

    Worth of the offer = $20,000
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “You are offered the right to receive $1000 per year forever, starting in one year. If your discount rate is 5%, what is this offer worth to ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
What kind of applications can improve the quality of your blog
Answers (1)
Which of the following is the best example of an activity undertaken by someone who economists classify as an entrepreneur? A. Someone running for political office B. Someone buying and selling shares of stock C. Someone starting a new business D.
Answers (1)
A sales manager has implemented a program for his salespeople that involves a meeting with each salesperson, during which the sales manager gives the salesperson the yearly quota for the salesperson's territory.
Answers (1)
According to World Bank estimates, by how much did consumer spending decline as a result of the 40 percent drop in the index of consumer confidence between 2007 and 2009? Enter your answer in billions.
Answers (1)
The smallest unit in the job analysis process is the task a. True b. False
Answers (2)
New Questions in Business
The balance in the Accounts Receivable account decreased from $18,000 at the beginning of the month to $15,000 at the end of the month. Sales on account during the month totaled $130,000.
Answers (1)
A firm is considering a replacement project which requires the initial outlay of $300,000 which includes both an after-tax salvage from the old asset of $12,000 and an additional working capital investment of $8,000.
Answers (1)
What payment type is best if you are trying to stick a budget
Answers (2)
For each of the following transactions of Spotlighter, Inc., for the month of January, indicate the accounts, amounts, and direction of the effects on the accounting equation. A sample is provided.
Answers (1)
Do you think it's necessary to have a love of sports to work in the Sports Industry?
Answers (2)
Home » Business » You are offered the right to receive $1000 per year forever, starting in one year. If your discount rate is 5%, what is this offer worth to you
Sign Up Forgot Password?