Perpetual stream of annual payments

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Reference no: EM132042390

You can choose any one of the following prizes. If your discount rate is 11% (annual compounding), which is the most valuable prize, i.e. has the greatest present value? A lump sum payment of $10,000 today. A lump sum payment of $25,000 at the end of 10 years. Five annual payments of $2,800 - the first payment occurs one year from today. A perpetual stream of annual payments starting at $500 in one year and increasing at 5% per year thereafter. A perpetual stream of annual payments of $1,000 starting in one year.

Reference no: EM132042390

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