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14 August, 13:42

What's the present value, when interest rates are 8.0 percent, of a $160 payment made every year forever? (Round your answer to 2 decimal places.)

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  1. 14 August, 13:53
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    The present value, when interest rates are 8.0 percent, of a $160 payment made every year forever is $2,000.

    Explanation:

    Payments each year = Cash flow = C = $160

    Rate of Interest = r = 8% = 0.08

    Present value of Perpetuity = Cash flow / rate of return

    Present value of Perpetuity = C / r

    Present value of Perpetuity = $160 / 0.08

    Present value of Perpetuity = $2,000

    So, the present value, when interest rates are 8.0 percent, of a $160 payment made every year forever is $2,000.
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