Calculate the value today of security that promises the future expected cash flows beginning in year 1,
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Question:
Calculate the value today of security that promises the future expected cash flows beginningin year 1, assuming a discount rate of 10%.
a)$80 for the first years 1-3, followed by $150 for the following 5 years.
b)Growth rate in cash flows of 10% pa in perpetuity. Cash flow in year 0 was $80.
c)As with b) only assume that the growth rate is 12%
d)As with b) only assume that the growth rate is negative 2%. Does this make economic sense?
e)As with b) only assume that the present value is $1,680 and the growth rate is unknown. What is the growth rate?
Related Book For
Intermediate accounting
ISBN: 978-0077647094
7th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson
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