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What is the present value of a constant perpetuity of 25 per year where the required rate of return is 5%

Sagot :

anthougo

Answer:

The present value of a constant perpetuity of 25 per year where the required rate of return is 5% is:

$500

Explanation:

a) Data and Calculations:

A constant perpetuity = $1

Present value factor of a constant perpetuity for 25 per year at 5% is $1/0.002

Number of periods for the perpetuity per year = 25

Required rate of return = 5%

Rate of return per period = 5%/25 = 0.002

Therefore, the value of a constant perpetuity = $1/0.002

= $500

The $500 can be used to multiply any amount given obtain the total value of the perpetuity.

ayokenny2001

The present value of a constant perpetuity of 25 per year where the required rate of return is 5% is $500

Given the information below :

We know that a constant perpetuity(payments) = $1

Required rate of return = 5%

Rate of return per period = 5%/25 = 0.002

Number of periods for the perpetuity per year = 25

Therefore, the value of a constant perpetuity

= Payments / Rate of return per period

= $1 / 0.002

= $500

Hence, present value of a constant perpetuity of 25 per year where the required rate of return is 5% is $500

Learn more about constant perpetuity here : https://brainly.com/question/17157614

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