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25 January, 17:13

What is the present value of a perpetuity that makes annual payments of $10,000 at 4% compounded annually? (round your answer to the nearest dollar)

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  1. 25 January, 17:20
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    Present Value of Perpetuity is $25,000

    Explanation:

    Cash flow = $10,000

    Interest rate / Yield = 4%

    Present Value of Perpetuity = Cash flows / interest Rate or Yield

    Present Value of Perpetuity = $10,000 / 4%

    Present Value of Perpetuity = $10,000 / 0.04

    Present Value of Perpetuity = $25,000
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