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Issuing a growing perpetuity

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We grow is going public with a perpetuity that offers 150% of the face value. They will use an interest rate of 9% in the analysis. Managers anticipate that the recent slow down in dot.com securities will be short lived, so they think it might be less expensive to issue the security as a growing perpetuity with a constant annual growth of 4%. Are they right that issuing a growing perpetuity will be less expensive? What will happen if they issue the security as a 25 year growing annuity?

Reference no: EM133070836

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