Reference no: EM132692790

Question -

1. What is the present value of a perpetual stream of cash flows that pays $8,000 at the end of year one and the annual cash flows grow at a rate of 3% per year indefinitely, if the appropriate discount rate is 8%? What if the appropriate discount rate is 6%?

If the appropriate discount rate is 8%, the present value of the growing perpetuity is $

2. Mr. Bill S. Preston, Esq., purchased a new house for $120,000. He paid $30,000 upfront and agreed to pay the rest over the next 20 years in 20 equal annual payments that include principal payments plus 13 percent compound interest on the unpaid balance. What will these equal payments be?

If Bill agrees to pay the loan over the next 20 years in 20 equal end-of-year payments plus 13 percent compound interest on the unpaid balance, what will these equal payments be?