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PV of cash flows (years 5 to perpetuity) = 262.55 x 1.0225/(0.09-0.0225) x 1.09^1/4
How to get 262.55 and annuity = 1-(1+r)^-n / r
r=0.09 n= 4 how to apply it to PoV of cas flows years 5 to perpetuity?i will help you by explaining and i hope you understand it because i am sure we will be meeting something like this on tuesday. 262.55 are the year four cash flows. thus if the perpertuity was to start from the year 3. use year 3 cash flows. the formular used is based on the formular P = D(1+g)/(re-g)
in this case D is the year 4 cash flows. but since our perpetuity starts from year 4 onward, in order to discount it to year0 multiply the answer from above by the year 4 discount factor. it is just a matter of copying from the tables. dont worry yourself using the perpertuity formular
hope it helps
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