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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Peretuity
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
Where are you finding these questions, because again your answer is correct assuming you have copied the question correctly?