Essay
What is the present value of a cash flow stream of $10,000 per year annually for 11 years that then grows at 2 percent per year forever? Assume the appropriate discount rate is 12 percent.Divide the cash flows into two periods: An 11-year annuity of $10,000,and a growing perpetuity beginning in the 11th year.The value of the 11-year annuity is $59,377,as shown below:
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Correct Answer:
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