Assume a series of monthly cash flows. The next (upcoming) cash flow is CF₁ = $550. The cash flows will grow at a rate of 12% per year into the foreseeable future (i.e., forever). The appropriate interest rate (required rate of return) is 18% per year, compounded monthly.

Required

A. Calculate the amounts of the next three upcoming cash flows (CF₁, CF2, CF3)

B. What is the present value of this growing perpetuity?

Answer rating: 100% (QA)

CF1 550 CF2 CF1 1 Growth rate 550 1 12 550 112 CF2 616 CF3 CF2 1 Growth rate 616 1 ... View the full answer