Assuming, that discount rate is 7% per annum, how much would you pay toreceive Rs.50, growing at 5%, annually, forever.(a) 2500(b) 3000(c) 3500(d) 4000
Question
Solution 1
This is a question of calculating the present value of a growing perpetuity. The formula for the present value of a growing perpetuity is:
PV = D / (r - g)
where:
- PV is the present value
- D is the dividend or cash flow
- r is the discount rate
- g is the growth rate
In this case, D = Rs.50, r Knowee AI is a powerful AI-powered study tool designed to help you to solve study problem.
Knowee AI is a powerful AI-powered study tool designed to help you to solve study problem.
Knowee AI is a powerful AI-powered study tool designed to help you to solve study problem.
Knowee AI is a powerful AI-powered study tool designed to help you to solve study problem.
Knowee AI is a powerful AI-powered study tool designed to help you to solve study problem.
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