Valuing a level perpetuity
A business pays out $ of cash flow at the end of every year, forever. If your required annual return (discount rate) is , what is the most you should pay for it today (in dollars)?
Show hints (2)+
- A constant payment forever is a perpetuity: .
- Here .
Answer
Reveal answer →Final answer
625
Create a free account to see the full worked solution and track your progress.
Interview format: Hedge Fund Quant, Systematic & Data-Driven Trading