[yoli100]

Thanks very much!!
Regards

[yoli100]

Thanks very much

[yoli100]

Hi John,

The question is:

A project is expected to earn $5,000 per year (at current prices) in perpetuity, inflating at 4% per year. The first receipt will be in one years time.
The cost of capital is 12%
What is the present value of the receipts ( to the nearest $100)

Answers are:

$62,500, 58,000, 41,700, 65,000

I get 41,700 with my calculations but this is not the correct answer

I think I am applying incorrectly the perpetuity discount factor?

Thanks
Yolanda

[Author]

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