medium · Principles of Finance time-value-of-money
An investor is evaluating a project that will provide an initial payment of 5,000 one year from today, with subsequent annual payments growing at a rate of 4% for a total of 10 years.
If the appropriate discount rate is 9%, which of the following expressions correctly represents the present value of this growing annuity?
- (5,000)/(0.09) × [1 - (1.09)^-10]
- (5,000)/(0.09 - 0.04)
- (5,000)/(0.09 - 0.04) × [1 - ((1.04)/(1.09))^10]
- frac5,000 × (1.04)^10(1.09)^10
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