1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Likurg_2 [28]
3 years ago
6

Clarissa wants to fund a growing perpetuity that will pay $ 4 comma 000 per year to a local​ museum, starting next year. She wan

ts the annual amount paid to the museum to grow by 5​% per year. Given that the interest rate is 8​%, how much does she need to fund this​ perpetuity?
Business
1 answer:
musickatia [10]3 years ago
6 0

Answer:

To fund this perpetuity, she needs $133,333.33 today.

Explanation:

The growing perpetuity that is growing at a constant rate is just like a constant dividend growth stock. The amount paid to the museum will grow at a constant rate of 5%. Using the same approach as the constant growth model of DDM, the amount of fund needed to be invested for this perpetuity can be calculated as,

PV = Cash flow 1 / i - g

Where,

  • Cash flow 1 is the amount that will be paid to the museum next year.
  • i is the interest rate
  • g is the growth rate in funds

PV = 4000 / (0.08 - 0.05)

PV = $133,333.33

You might be interested in
How do we advice company on how to support each of it`s S.B.U
BabaBlast [244]
The company's next task is to determine what objective, strategy and budget to assign to each SBU. Four strategies can be pursued: build, hold harvest, or divest.
4 0
1 year ago
What is the purpose of NCUA Lending Regulations?
Dafna11 [192]
The purpose of NCUA Lending regulation is to create stability and to keep a fair condition in a lending process. A foul or a fraud in the lending process could easily have been made if there is a bad intention in either creditor or debtor in the lending process<span>. An intention for not paying a credit agreement is one of this foul example.</span>
8 0
3 years ago
Read 2 more answers
Comparing perfect first degree price discrimination to perfect competition one can conclude that: (i) Total social surplus is th
marta [7]

Answer:

C. Both (i) and (ii) are true

Explanation:

Under perfect price discrimination, consumer surplus doesn't exist since the supplier is selling the good or service at the maximum price that each consumer is willing to pay. This situation maximizes supplier surplus.

Under perfect competition, both supplier and consumer surplus exist.

Since total social surplus = supplier surplus + consumer surplus, total surplus should be the same in both situations.

5 0
2 years ago
On December 1, 2018, Shamrock Company received $9,600 from Destiny, Inc. for rent of an office owned by Shamrock Company. The pa
andrey2020 [161]

Answer:

b. credit to Rent Revenue of $3,200

Explanation:

Cash collected in advance results in the the creation of an asset and a liability. Hence a debit to cash account and a credit to deferred revenue. When the revenue is earned, it is recognized as a credit to revenue and a debit to deferred revenue with the amount earned.

Amount earned as at December 31

=  1/3 × $9,600

= $3,200

Entries required

Debit Deferred Rent revenue   $3,200

Credit Rent Revenue                 $3,200

Being entries to recognize revenue earned as at December 31

4 0
3 years ago
To provide external shareholders with relevant, reliable, consistent, and comparable financial information, the accounting profe
masha68 [24]

Answer:

<u>Generally accepted accounting principles</u>

Explanation:

Generally accepted accounting principles abbreviated as GAAPs , refer to set of accounting rules and principles to ensure clarity, consistency of reported information and to enhance reliability and comparability of accounting information.

GAAPs were prescribed by Financial Accounting Standard Board (FASB) of the United States. The accountants of public companies in United States are supposed to abide by GAAP principles while compiling accounts and preparing financial statements.

Thus, GAAPs lay emphasis upon presenting financial information which is relevant to the shareholders, which is true and can be relied upon , which is consistent and which can be compared to deduce past trends and for forming opinions and arriving at conclusions.

6 0
3 years ago
Other questions:
  • Galla Inc. needs to determine a price for a new product. Galla desires a 25% markup on the total cost of the product. Galla expe
    11·1 answer
  • You borrow $210,000 to purchase a home. the terms of the loan call for monthly payments over 30 years at a mortgage rate of 4.50
    9·1 answer
  • The Presidential Cabinet consists of _____.
    8·1 answer
  • A smaller business with variable cash flow is looking to establish a pension plan for its 50 employees. It wants a plan that all
    11·2 answers
  • Marylin and Andy live together and are co-owners of a property but are not married. What is the most likely form of co-ownership
    8·2 answers
  • Zacher Co.'s stock has a beta of 1.48, the risk-free rate is 4.25%, and the market risk premium is 5.50%. What is the firm's req
    11·1 answer
  • An activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting
    5·1 answer
  • Line Corporation's balance sheet showed the following amounts for their liability and stockholders' equity accounts: Current Lia
    7·1 answer
  • All _____________must become part of the federal reserve system.
    14·1 answer
  • Joshua controls all the pay​ rates, raises, and bonuses in your department. He is also able to assign you to an interesting work
    15·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!