Homework: Homework 3 Score: 0 of 10 pts P6-44 (similar to) Save 20 of 22 (13 com

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Homework: Homework 3 Score: 0 of 10 pts P6-44 (similar to) Save 20 of 22 (13 complete) HW Score: 50%, 1 10 of 220 pts EQuestion Help 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 $2,000 at the end of year one and the annual cash flo s grow at a rate of 3% per year indefinitely if the appropriate discount rate is 8%? What if the appropriate discount rate is 6%? a. If the appropriate discount rate is 8% the present value of the growing perpetuity is (Round to the nearest cent Enter your answer in the answer box and then click Check Answer Clear All remaning rch

Explanation / Answer

Present Value of Growing Perpetuity

= dividend ÷ (Discount Rate - Growth Rate)

PV = $2,000 ÷ ( 8% - 3%)

= $40,000

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