Calculate the present value of a growing annuity given the following information: current cash flows: $90,000; cash flow growth rate = 2%; timeframe = 20 years; required rate of return = 5%.

Question

Quizplus · Accepted Answer

The present value of a growing annuity can be calculated using the formula: PV = C * [(1 - ((1 + g) / (1 + r))^t) / (r - g)], where C is the current cash flow, g is the growth rate, r is the required rate of return, and t is the timeframe. Plugging in the given values: PV = $90,000 * [(1 - ((1 + 0.02) / (1 + 0.05))^20) / (0.05 - 0.02)] = $1,319,886.

Calculate the Present Value of a Growing Annuity Given the Following