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Calculating the PV of growing perpetuity

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Mark Weinstein has been working on an advanced technology in laser eye surgery. His technology will be available in the near term. He anticipates his first annual cash flow from the technology to be $218,000, received two years from today. Subsequent annual cash flows will grow at 4 percent in perpetuity.

What is the present value of the technology if the discount rate is 10 percent?

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Solution Summary

Solution depicts the steps to calculate the present value of a growing perpetuity.

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Growth rate=g=4%
Expected cash flow at the end of year ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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