Question: 3 . You are expecting 2 2 growing annual payments, starting with $ 1 , 0 0 0 next year. The payments will increase by

3 .

You are expecting

22

growing annual payments, starting with $

1, 000

next year. The payments will increase by

5 %

from year to year. The appropriate discount rate is

5.6 % .

.

Calculate the present value of those expected payments, using the annuity formula.

.

Calculate the present value of those expected payments, by forecasting each of the cash flows, computing their present values separately, and then computing the sum of the present values.

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