The present value of a $25,000 perpetuity at a 14 percent discount rate is
A. 178,571
B. 285,000
C. 350,000
D. 219, 298
285,000
To calculate the present value of a perpetuity, you need to use the formula:
Present Value = Payment / Discount Rate
In this case, the payment is $25,000 and the discount rate is 14 percent or 0.14 in decimal form.
So, to find the present value, simply divide the payment by the discount rate:
Present Value = $25,000 / 0.14
= $178,571.43
Therefore, the present value of a $25,000 perpetuity at a 14 percent discount rate is approximately $178,571.
Hence, the correct answer is A. 178,571.
To calculate the present value of a perpetuity, you can use the following formula:
PV = A / r
Where PV is the present value, A is the annual payment, and r is the discount rate.
In this case, the annual payment is $25,000 and the discount rate is 14%.
PV = $25,000 / 0.14
Now we can calculate the present value using a calculator or by dividing the annual payment by the discount rate:
PV = $178,571
Therefore, the correct answer is A. 178,571.