Perpetuities Yang is evaluating an investment that will pay CNY 150 in one year, and it will continue to make payments at annual intervals thereafter, but the payments will grow at 5% forever.

a. What is the present value of the first CNY 150 payment if the discount rate is 9%?

b. How much cash will this investment pay 100 years from now? What is the present value of the 100th payment? Again, use a 9% discount rate.

c. What is the present value of the entire growing stream of perpetual cash flows?

d. Explain why the answers to parts a and b help to explain why an infinite stream of growing cash flows has a finite present value?