00:01
So here the question is given in three part and we need to calculate the present value or all the things.
00:08
So for all the parts, so first we need to know the formula for present value.
00:13
So it will be cash flow divided by discount rate.
00:16
Now, let's move towards the part a here.
00:19
It is given no growth.
00:21
So when it is no growth then present value will be $5 ,000 divided by 0 .1 1 which is already given in question, then it will become 45 ,000 454 .55.
00:36
Now, let's move towards the part b.
00:41
So here it is given 30 % growth.
00:44
So in this case, the cash flow is approach perpetuity is expected to grow at the rate of 3 .0 per year.
00:53
So let's calculate we here calculate the cash present value is equals to cash flow which is given $5 ,000 divided by discount rate, which is 0 .1 1 minus growth rate, which is 0 .03...