Calculate the Present Value of a Growing Annuity Given the Following

question 9

Multiple Choice

Calculate the present value of a growing annuity given the following information: current cash flows: $90,000; cash flow growth rate = 2%; timeframe = 20 years; required rate of return = 5%.

• A) $1,319,886
• B) $1,329,886
• C) $1,339,886
• D) $1,349,886
• E) $1,359,886

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Definitions:

Long Run

A period during which all factors of production and costs can be fully adjusted, allowing for a complete analysis of economic equilibrium and effects.

Expanding Plant

The process of increasing the size or capacity of a manufacturing or production facility.

Product Price

The financial outlay necessary to acquire a certain item or service.

Competitive Firm

A business that operates in a market where it has multiple competitors, and no single firm can influence the market price of goods or services.