What is the value today of this perpetuity

Assignment Help Financial Management
Reference no: EM131583342

A perpetuity pays $90 every year forever. Assume a 9% discount rate and cash flows at the end of period.

(a) What is the value today of this perpetuity?

(b) How much more is this perpetuity worth than an annuity of the same amount for 30 years?

(c) If the first payment of this perpetuity weren’t made until 4 years from now, how much would you need to deposit today to fund the purchase of the perpetuity?

(d) How much would this perpetuity be worth if the discount rate were 0%?

Reference no: EM131583342

Questions Cloud

How much will the annual payment be : This loan is to be repaid in equal annual installments at the end of each year over the next 4 years, How much will the annual payment be?
How much do you need to save per year : How much (in terms of real dollars) do you need to save per year over the next 30 years to meet your retirement needs?
What is the rate of return on your investment : Without a business degree, you currently earn $35,000 per year. What is the rate of return on your investment?
What would be his annual real rate of return : What would be his annual real rate of return?
What is the value today of this perpetuity : A perpetuity pays $90 every year forever. Assume a 9% discount rate and cash flows at the end of period. What is the value today of this perpetuity?
Present value of stream of ordinary annuity cash flows : The present value of a stream of ordinary annuity cash flows of $20 per year is $100 when valued utilizing a 15% annual rate.
You should be willing to pay him for half of his business : what is the most you should be willing to pay him for half of his business (he will give you half of the earnings each year)?
Develop ability to perform financial analysis : Develop ability to perform financial analysis through the application of concepts,
Capita spending on health care : As of 1995, per capita spending on health care in the United States was about $3,600.

Reviews

Write a Review

Financial Management Questions & Answers

  Create an argument supporting

Create an argument supporting that using the earnings-based valuation method yields the most accurate results.

  What is value of new firm equity-gain or loss for bondholder

What is the combined value of equity in the two existing companies? What is the value of the new firm’s equity? What was the gain or loss for bondholders?

  Calculate the standard deviation of the portfolio

Calculate be variance of Delta, Caps and BAT.- Calculate the variance of portfolio using the following formulae:- Calculate the standard deviation of the portfolio.

  What is the expected present value of growth opportunities

Suppose that a firm's common equity is selling for $150 in the market, that the firm has $115 million in Net Income, and the firm has 20 million common shares outstanding. Finally, the firm faces a moderately high cost of common equity of 14%. What i..

  Consultant to handle project valuation

Dave Inc. recently hired you as a consultant to handle project valuation. You have obtained the following information. The firm has 2 million shares of common stock outstanding. The common stock just paid a dividend of $1. It is expected to grow by 3..

  Succinct report that includes a results-filled executive

Each student is to critically analyze the provided information on Apple Computers. In particular, each student updates the information by additional research to include Apple’s newer product lines, its competitors, and recent events, and decides the ..

  Net operating income will increase

The Clyde Corporation's variable expenses are 35% of sales. Clyde Corporation is contemplating an advertising campaign that will cost $27,000. If sales increase by $88,000, the company's net operating income will increase by:

  What is the nal of the lease from lessor viewpoint

What is the NAL of the lease from the lessor's viewpoint?

  Loan feature as a means for maintaining liquidity

If you think he needs life insurance, is whole life his best choice?- His plan to use the whole life policy's loan feature as a means for maintaining liquidity.

  What is the equivalent annual annuity for each machine

The Perez Company has the opportunity to invest in one of two mutually exclusive machines that will produce a product it will need for the foreseeable future. Machine A costs $11 million but realizes after-tax inflows of $5 million per year for 4 yea..

  Pledges to increase its dividend

Use BAII Plus Calculator and show calculator entry for the following: Mickelson Corporation will pay a $2.65 per share dividend next year. The Company pledges to increase its dividend by 4.75 percent per year indefinitely. If you require a return of ..

  Most recent financial statements

In its most recent financial statements, Newhouse Inc. reported $65 million of net income and $975 million of retained earnings. The previous retained earnings were $926 million. How much in dividends were paid to shareholders during the year? Assume..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd