A perpetuity costs 77.1 and makes end-of-year payments. The perpetuity pays 1 at the end of year 2, 2 at the end of year 3; : : : :; n at the end of year n+1. After year n+1, the payments remain constant at n. The annual effective interest rate is 10.5%. Calculate n.
For the perpetual cash flows, The present value of all the future cash flows PV = 1/(1+r)^2 + 2/(1+r)^3 + ..... n/(1+r)^n+1 +... View the full answer