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8 June, 06:24

Compute the present value of a perpetuity that pays $ 13,385 annually given a required rate of return of 9 percent per annum. (Round your answer to 2 decimal places; record your answer without commas and without a dollar sign).

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  1. 8 June, 06:53
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    The present value of perpetuity is $148,722.22

    Explanation:

    A perpetuity is a series of equal cash flows that are paid after equal intervals of time for an infinite period of time. The present value of a perpetuity can be calculated using the following formula:

    Present Value of perpetuity = Cash Flow / r

    Where,

    r is the required rate of return.

    Present value of perpetuity = 13385 / 0.09

    Present value of perpetuity = $148,722.22
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