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Ken Garrett says
May 9, 2018 at 9:27 pm
For a perpetuity, the discount factor is 1/r. Here 1/0.09 = 11.1111
PV of income = 1.111 x 5670 = 63,000 NPV = 63,000 – 50,000 = 13,000
May 9, 2018 at 4:46 pm
Can you please explain how they arrived at the answer given A company is considering investing $50,000 in a project which will yield $5,670 per annum in perpetuity. The company’s cost of capital is 9% per annum. Required: Calculate the net present value of the project.
answer is $13,000
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