Receiving perpetuity from the account

Assignment Help Financial Management

Reference no: EM13953780

You are going to pay $800 into an account at the beginning of each of 20 years. The account will then be left to compound for an additional 20 years. At the end of the 41st year you will begin receiving perpetuity from the account. If the account pays 14%, how much will you receive each year from the perpetuity (round to nearest $1,000)?

NOTE: Please use a financial calculator or formula, NO EXCEL SHEET.

A) $150,000

B) $170,000

C) $160,000

Reference no: EM13953780

Questions Cloud

Generate unlevered cash flow : A project can generate unlevered cash flow of $4 million per year in perpetuity. Suppose the firm considering this project finances its operations with an equal mix of debt and equity. The required return on debt is 5%, and the required return on equ..

What is the loss function equation : The specifications of a steel shaft are 4.65±0.15mm. The device sometimes fails when the shaft exceeds the specification. When failure occurs, repair or replacement is necessary at an average cost of $85.00. What is the loss coefficient k? What is th..

Price of shares remains unchanged in euros : Assume that the Rome Electricity Company (REC) wishes to create a sponsored ADR program worth $290 million to trade its shares on the New York Stock Exchange. Assume that REC's stock price rises from €30 to €35 per share. If the exchange rate does n..

Proposed acquisition of a new special-purpose machine : You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose machine. The machine's basic price is $1,000,000 and our accountant requires that it be written off over its 5 year class using straigh..

Receiving perpetuity from the account : You are going to pay $800 into an account at the beginning of each of 20 years. The account will then be left to compound for an additional 20 years. At the end of the 41st year you will begin receiving perpetuity from the account. If the account pay..

What is the new overall required rate of return for firm : Initially firm x has a beta of 1.3, when Rrf=7% and Rm=12 percent. The firm now sells 10 percent of its assets (Beta=1.2) and uses the proceeds to purchase another asset, a machine with a beta of .8. What is the required rate of return on the machine..

Use the amount in the money market account for down payment : You intend to purchase a new car upon graduation in two years. It will have a cost of $29,381, including all extra features and sales tax. You just received a $3,000 pre-graduation gift from your rich uncle that you intend to deposit in a money marke..

Exactly equal to the present value of annual installments : Francis Peabody just won the $89,000,000 California State Lottery. The lottery offers the winner a choice of receiving the winnings in a lump sum or in 26 equal annual installments to be made at the beginning of each year. What is the amount of the l..

Calculate the NPV of this investment opportunity : Fast Track Bikes: Inc. is thinking of developing a new composite road bike. Development will take six years and the cost is $209:600 per year. Once in production, the bike is expected to make $291,394 per year for 10 years. Calculate the NPV of this ..

User Account

All Pages