24.Norwood Investments is putting out a new product. The product will pay out $25,000 in the first year, and after that the payouts will grow by an annual rate of 2.5 percent forever. If you can invest the cash flows at 7.5 percent, how much will you be willing to pay for this perpetuity?

To calculate the present value of a perpetuity, you can use the formula:

PV = CF / r

Where PV is the present value, CF is the cash flow, and r is the discount rate.

In this case, the cash flow in the first year is $25,000, and it grows by an annual rate of 2.5 percent forever. The discount rate is 7.5 percent.

To calculate the present value, you can divide the first year cash flow by the discount rate minus the growth rate:

PV = $25,000 / (0.075 - 0.025)

Simplifying the equation:

PV = $25,000 / 0.05

PV = $500,000

Therefore, you would be willing to pay $500,000 for this perpetuity.