The present value of a perpetuity with an annual year-end payment of $12,000 and expected annual rate of return equal to 7% is closest to:
A) $144,000.00.
B) $148,908.49.
C) $171,428.57.

Question

Quizplus · Accepted Answer

The present value of a perpetuity is calculated using the formula PV = PMT / r, where PV is the present value, PMT is the annual payment, and r is the annual rate of return. Plugging in the given values, we get PV = $12,000 / 0.07 = $171,428.57.

The Present Value of a Perpetuity with an Annual Year-End