79% ), Sun 8:33 AM a mathxl.com Fin320_F1713 Test:Valuation Exam Time Remaining:

Question

79% ), Sun 8:33 AM a mathxl.com Fin320_F1713 Test:Valuation Exam Time Remaining: 00:56:21 Submit Test This Question: 1 pt 13 of 25 (3 complete) This Test: 25 pts possible Martin wants to provide money in his will for an annual bequest to whichever of his living relatives is oldest. That bequest will provide $7,000 in the first year, and will grow by 7% per year, forever. If the interest rate is 10%, how much must Martin provide to fund this bequest? OA. $116,667 O B. $280,000 OC. $186,667 0 D. $233,333 Click to select your answer 0a did not ok Air

Explanation / Answer

d) 233,333 as the Perpetuity value formuka is used with Growth rate =7% and Interest rate = 10%

Year 1 Return is 7,000

Year 2 Return is 7,490

Therefore, perpetuity after year 2 would be 7490/( 10-.03) = 233,333

(We have not done Present Value of this amount,)

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