Question

the annual discount rate is 10% beginning in 2016, you will receive $10000 on the first day of every year. what is the resent value of this inginite sequence of cash flow

Answer 1

$100,000

Explanation:

Data provided

Perpetual cash flow = $10,000

Discount rate = 10%

According to the given situation, the computation of Present value of this inginite sequence of cash flow is shown below:-

Present value = Perpetual cash flow ÷ discount rate

= $10,000 ÷ 10%

= $10,000 ÷ 0.1

= $100,000

Therefore for computing the present value we simply applied the above formula.