Calculate the Present Value of a Growing Annuity Given the Following

question 175

Multiple Choice

Calculate the present value of a growing annuity given the following information: annual cash flows = $67,000; cash flow growth rate = 3%; required rate of return = 8%; timeframe = 45years.

• A) $1,179,251
• B) $1,180,251
• C) $1,181,251
• D) $1,182,251
• E) $1,183,251

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Definitions:

Consumer Goods

Products and services that are purchased for personal use or consumption by the general public.

Capital Goods

Goods that are used in producing other goods and services rather than being bought by consumers.

Opportunity Cost

The cost of forgoing the next best alternative when a decision is made to choose one option over another.

Production Possibilities Curve

A graphical representation showing the maximum quantity of goods and services that a society can produce with existing resources and technology, underlining the concept of opportunity cost.