Consider the formula which gives the present value of an annuity of $1 per period for n periods a What is the value of (1 r) n for very large values of n b What is the value of PV for very large values of n c If n is infinitely large, we have a perpetuity What is the present value of a perpetuity o...

The formula for present value PV of an annuity is given by PV 11r where r is the ...

Consider the formula which gives the present value of an annuity of $1 per period for n

Question:

Consider the formula

PV 1- (1+r)-n r

which gives the present value of an annuity of $1 per period for n periods.

a. What is the value of (1 + r)⁻ⁿ for very large values of n?

b. What is the value of PV for very large values of n?

c. If n is infinitely large, we have a “perpetuity”. What is the present value of a perpetuity of $1 per period if r is 10 percent?

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An Introduction To Accounting And Managerial Finance A Merger Of Equals

ISBN: 9789814273824

1st Edition

Authors: Harold JR Bierman

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Question Posted: Dec 11, 2023 01:02 PM

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Consider the formula which gives the present value of an annuity of $1 per period for n

Question:

PV 1- (1+r)-n r

Step by Step Answer:

The formula for present value PV of an annuity is given by PV 11r where r is the ...View the full answer

An Introduction To Accounting And Managerial Finance A Merger Of Equals

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