A perpetuity has a cash flow of $20 and a discount rate of 10%. What is the value of the perpetuity?
A)$22
B)$500
C)$200
D)none of the above

Question

Quizplus · Accepted Answer

The formula for the present value of a perpetuity is: 
Present value = cash flow / discount rate

Plugging in the given values: 
Present value = $20 / 10% 
Present value = $200

Therefore, the value of the perpetuity is $200. Option C is the correct answer.

A Perpetuity Has a Cash Flow of $20 and a Discount