Unit 6 Question 7:

(Related to Checkpoint 6.5) (Present value of a growing perpetuity) What is the present value of a perpetual stream of cash flows that pays $1,000 at the end of year one and the annual cash flows grow at a rate of 2% per year indefinitely, if the appropriate discount rate is 11% ? What if the appropriate discount rate is 9% ? a. If the appropriate discount rate is 11%, the present value of the growing perpetuity is ? (Round to the nearest cent.)