The Growing Perpetuities: exercise
{"Image DocumentName": "The Growing Perpetuities: exercise", "Image ImageDescription": "A common stock will pay a cash dividend of  4 next year. After that the dividend are expected to increase indefinitely at 4% per year. If the discount rate is 14%, what is the PV of the stream of dividend payments. Solution: This case is must considered a growing perpetuity. That is we value the stream of cash flow that grows at a constant rate. This is a geometric serie with rate r higher than rate of growth of salaries g. Then this formula can be simplified: PV=4/( )= 40. Source: Problem Sets within Brealey et al. (2014)", "Image XResolution": "37", "Image YResolution": "37", "Image ResolutionUnit": "Pixels/Centimeter", "Image Software": "SlidePlayer", "Image YCbCrPositioning": "Centered"}