You must value a perpetual lease. It will cost $100,000

each year

in real terms

that is, its proceeds will not grow in

real terms, but just contractually keep pace with inflation. The

prevailing interest rate is 8% per year, and the inflation rate is

2% per year forever. The first cash flow of your project

next year

is $100,000

quoted in today's real dollars

. What is the PV of the

project? (Warning: Watch the timing and amount of your first

payment.)