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umka21 [38]
3 years ago
5

What's the present value, when interest rates are 8.0 percent, of a $160 payment made every year forever? (Round your answer to

2 decimal places.)
Business
1 answer:
stepladder [879]3 years ago
8 0

Answer:

The present value, when interest rates are 8.0 percent, of a $160 payment made every year forever is $2,000.

Explanation:

Payments each year = Cash flow = C = $160

Rate of Interest = r = 8% = 0.08

Present value of Perpetuity = Cash flow / rate of return

Present value of Perpetuity = C / r

Present value of Perpetuity = $160 / 0.08

Present value of Perpetuity = $2,000

So, the present value, when interest rates are 8.0 percent, of a $160 payment made every year forever is $2,000.

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