You must value a perpetual lease it will cost 100000 each, Ask an Expert

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You must value a perpetual lease. It will cost $100,000 each year in real terms-that is, its proceeds will not grow in real terms, but just contractually keep pace with inflation.

The prevailing interest rate is 8% per year, and the inflation rate is 2% per year forever.

The first cash flow of your project next year is $100,000 quoted in today's real dollars. What is the PV of the project?

(Warning: Watch the timing and amount of your first payment.)

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91990325

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