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What is the cash flow worth for record company

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Reference no: EM132771473

Problem 1: A record company bought the rights to an artist's music catalogue and they expect to receive royalty payments of $38,000 per year forever (a perpetuity). What is this cash flow worth? Assume interest rates are 7%.

Group of answer choices

Option 1: $ 650,286

Option 2: $ 1,127,286

Option 3: $ 542,857

Option 4: $ 500,000

Option 5: The value is infinite.

Reference no: EM132771473

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