RatedrillGrowing perpetuity
A time value of money problem from Ratedrill. Solve it with one answer box, with fresh numbers on every attempt and the formula, calculator keystrokes and Excel version in the worked answer, and it is checked the moment you submit.
The task
A rental property's net cash flow next year will be $8,000, and it is expected to grow 1% a year forever. At a required return of 9%, what is the property worth today?
What this problem teaches
The formula: PV = C1 / (r - g).
A hint if you get stuck
Growing perpetuity: PV = C1 / (r - g), where C1 is next year's cash flow.
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