Engineering Board Exam Reviewer · Perpetuity and Capitalized Cost · medium
A perpetuity pays P100,000 at the end of year 1, and each later payment is 4% larger than the previous one, forever. Find the present worth at 10% interest.
- P1,666,666.67
- P1,000,000
- P714,285.71
- P2,500,000
Answer
A. P1,666,666.67
Solution
For a growing perpetuity, PW=A1/i-g= 100,0000.10-0.04=P1,666,666.67.
More Perpetuity and Capitalized Cost questions
- Equipment costs P400,000, must be replaced every 10 years with a salvage value of P40,000, and has annual operating costs of P25,000. Find…
- A scholarship pays P120,000 every year forever, with the first payment made now. Find the present worth at 8% interest.
- Find the present value of a perpetuity that pays P5,000 per year, at 8% annual interest.
- What annual payment can a perpetuity of P200,000 principal generate at 6% annual interest?
- Find the capitalized cost of a structure that requires an initial cost of P500,000 and annual maintenance of P20,000 forever, at 8% annual…
- A machine costs P300,000 and requires P15,000 annual maintenance forever. Find its capitalized cost at 10% interest.
- A bridge needs periodic replacement of a P400,000 component every 10 years, forever, at 6% interest. Find the present worth of all future…
- Find the capitalized cost of a project with a first cost of P1,000,000, no salvage value, and an annual operating cost of P50,000 forever…