Morris Companies has an issue of preferred stock outstanding that pays a $7.75 dividend every year in perpetuity. What is the re
1 answer:
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Answer:
$ 2,209,797.96
Explanation:
Given:
Salary = $100,000
Salary investment rate = 13%
Salary increase rate(g) = 5%
number of year = 25
Annual rate of return(i) = 11%
Calculation:
Salary invested = $100,000*13% = $13,000
calculation of present worth
Answer:
72,91
Explanation:
the key to answer this question is to see that we can calculate the present value as a series of future payments valuated today, so there are two stages, the first one i going until 10 years and from ther is to infinity, so the present value can be solved as:
where is the present value of the annuity,
is the interest rate for every period payment, n is the number of payments, and P is the regular amount paid. so applying to this particular problem.
keep in mind that is the formula for calculating a perpeuity, it means the present value of a infinite future payments but look carefully at the expresion
it means we are calculating a perpeuity which is located in the future and we compute it as money of today, so we have: