What is the present value of an infinite stream of annual payments of $10,000 per year if the first payment is received one year from today? Assume the interest rate is 10 percent.
A)$100,000
B)$1,000,000
C)$10,000,000
D)$1,000,000,000

Question

Quizplus · Accepted Answer

The present value of an infinite stream of annual payments (a perpetuity) is calculated using the formula PV = C / r, where C is the annual payment and r is the interest rate. Here, C = $10,000 and r = 10% or 0.10, so PV = $10,000 / 0.10 = $100,000.

What Is the Present Value of an Infinite Stream of Annual