Assume Ziggy will receive a perpetual payment (i.e. a perpetuity) of $42,000 that will neither grow nor decrease over the years. Assuming the interest rate of 10.5% and the first payment will be made next year (that is, such that t = 1), what is the present value of the perpetuity here?

Now, assume instead that Ziggy will receive a perpetual payment (i.e. a perpetuity) of $42,000 that will grow by 2.7% each year. Assuming the interest rate of 10.5% and the first payment will be made next year (that is, such that t = 1), what is the present value of the perpetuity here?

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1 Present Value of a Perpetuity with Constant Payments To calculate the present value of a perpetuit... View the full answer