What is the present value of a series of $5,000 end-of-the-year cash flows to be received forever if the required rate of return is 6.00% per year and the first cash flow is one year from today?
A)$8,333.33
B)$83,333.33
C)$300.00
D)This question cannot be answered because there is no time period provided.

Question

Quizplus · Accepted Answer

This is an example of a perpetuity, where the cash flows are received forever. The present value can be calculated using the formula: Present Value = Cash Flow / Required Rate of Return. Therefore, Present Value = $5,000 / 0.06 = $83,333.33.

What Is the Present Value of a Series of $5,000