Question: You are making forecasts for two securities that promise perpetual, growing annual cash flows. For both securities, calculate the cash flow you can expect at

You are making forecasts for two securities that promise perpetual, growing annual cash flows. For both securities, calculate the cash flow you can expect at the end of year 7 (that is, seven years from now).

a. Security A will pay $10 next year (year 1), and the cash flows will grow at a rate of 2% per year thereafter.

b. Security B paid $9 last night, and the cash flows are expected to grow at a rate of 2.5% per year.

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