What is the present value of $10,000 per year in perpetuity at an interest rate of 10%?
A)$10,000
B)$100,000
C)$200,000
D)$1,000

Question

Quizplus · Accepted Answer

The present value of perpetuity is given by the formula PV = CF/i where PV is the present value, CF is the cash flow, and i is the discount rate or interest rate. Substituting the given values, we get PV = 10,000/0.1 = 100,000. Therefore, the present value of $10,000 per year in perpetuity at an interest rate of 10% is $100,000. Therefore, the best choice is B.

What Is the Present Value of $10,000 Per Year in Perpetuity