Friday, November 20, 2009

What is the present value of the perpetual cash inflow?

You have the opportunity to invest in a business venture. You will be required to invest $10,000 now and $6000 a year from now. The venture will generate a perpetual cash inflow of $1000 every year, with the first inflow occurring 2 years from now.

What is the present value of the perpetual cash inflow?
You have to establish the appropriate discount rate, that is the interest rate appropriate for the flows. What interest rate do you want to use?
Reply:-10000 + -6000/(1+K) + 1000/k i think


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