You are evaluating a growing perpetuity investment from a large financial services firm. The investment promises an initial payment of $20,000 at the end of this year and subsequent payments that will grow at a rate of 3.4 percent annually. If you use a 9 percent discount rate for investments like this, what is the present value of this growing perpetuity?

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The present value of a growing perpetuity can be calculated using the formula PV = C / (r - g), where C is the initial payment, r is the discount rate, and g is the growth rate. Here, C = $20,000, r = 9% or 0.09, and g = 3.4% or 0.034. Plugging these values into the formula gives PV = $20,000 / (0.09 - 0.034) = $20,000 / 0.056 = $357,143.

You Are Evaluating a Growing Perpetuity Investment from a Large