The interest rate is 10%. a. What is the PV of an asset that pays $1 a
Question:
The interest rate is 10%.
a. What is the PV of an asset that pays $1 a year in perpetuity?
b. The value of an asset that appreciates at 10% per annum approximately doubles in seven years. What is the approximate PV of an asset that pays $1 a year in perpetuity beginning in year 8?
c. What is the approximate PV of an asset that pays $1 a year for each of the next seven years?
d. A piece of land produces an income that grows by 5% per annum. If the first year’s income is $10,000, what is the value of the land?
Perpetuity refers to payments that are made without an end or maturity date. A perpetuity is classified as an annuity, which is something that earns a dividend or receives a payment at a regularly scheduled interval, generally yearly. So, how...
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Principles of Corporate Finance
ISBN: 978-0077404895
10th Edition
Authors: Richard A. Brealey, Stewart C. Myers, Franklin Allen
Question Posted: