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25 December, 18:43

Suppose that you have inherited a perpetuity that will pay $ 3,000 one year from now, each of the following annual payments will be 5% larger than the prior payment. Assuming that the annual opportunity cost of capital is 15%, what is the value of this perpetuity today? Round your final answer to two decimals.

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  1. 25 December, 18:58
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    The answer is $30000

    Explanation:

    PV = Pmt / (i-g)

    PV = $ 3,000 / 0.15-0.05 = $30000

    Present value of this perpetuity is $30000
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