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Peretuity

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Peretuity

  • This topic has 1 reply, 2 voices, and was last updated 2 years ago by John Moffat.
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  • September 2, 2020 at 6:05 pm #583157
    james8500
    Member
    • Topics: 48
    • Replies: 9
    • ☆☆

    Hi

    Please can you assist with the below:

    An investment of $100,000 to be made on 31 December 20X7 will produce an annual return of $13,000 in perpetuity, with the first income occurring on 1 January 20X8.

    What is the net present value of this investment (to the nearest $10) on 31 December 20X6, discounted at 10%?

    The correct answer is: $39,090

    I cannot understand where the answer comes from. This is how I worked it out:

    Perpetuity = 13,000/0.1= 130,000+13,000< Since perp is made right away.

    NPV=143,000-100,000 = 43,000

    Thank you

    September 3, 2020 at 9:36 am #583212
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51529
    • ☆☆☆☆☆

    Where are you finding these questions, because again your answer is correct assuming you have copied the question correctly?

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