The present value of a $20,000 perpetuity at a 7 percent discount rate is
A)$186,915.
B)$285,714.
C)$140,000.
D)$325,000.

Question

Quizplus · Accepted Answer

The formula for present value of a perpetuity is: 
PV = C / r 
where C is the cash flow (in this case, $20,000), and r is the discount rate (in this case, 7%). 
Using this formula, we get: 
PV = $20,000 / 0.07 
PV = $285,714. 
Therefore, the correct answer is B.

The Present Value of a $20,000 Perpetuity at a 7