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    streams of payments

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    Assuming an interest rate of 10%, calculate the present value of the following streams of yearly payments

    a) $1,000 per year, forever, with the first payment one year from today

    b)$500 per year, forever, with the first payment two years from today

    c)$2,420 per year, forever, with the first payment three years from today

    I do not know how to encorporate the time factor to this problem - I know the forumla is
    PV = C/R - so I know that a = 1000/0.1 = 10,000


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    Solution Preview

    A) This is perpetuity the formula is PV= Perpetual cash Flow / Interest rate

    b) This is a perpetuity starting from next year i.e. If we are in year 1 then the first payment we will receive will be next year. So first calculate ...

    Solution Summary

    This job highlights streams of payments.