Present value of a growing perpetuity) As a result of winning the Gates Energy I

Question

Present value of a growing perpetuity) As a result of winning the Gates Energy Innovation Award, you are awarded a growing perpetuity. The first payment will occur in a year and will be for $30,000. You will continue receiving monetary awards annually with each award increasing by 7 percent over the previous award, and these monetary awards will continue forever. If the appropriate interest rate is 13 percent, what is the present value of this award? The present value of the award is (Round to the nearest cent)

Explanation / Answer

growth rate =7%
Interest Rate = 13%
PV of the award = 30,000/(13%-7%) = 500,000

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