Answer:
The PV is 125,000
Explanation:
We need to solve for the present value of a perpetuity:
[tex]\frac{Installment}{rate} = PV_p[/tex]
The yearly amounts are 10,000
while the current interest rate is 8% = 8/100 = 0.08
10,000 / 0.08 = 125,000
the perpetuity is worth 125,000 dollars
Note, when the market rate changes the value of the perpetuity also changes as the constant cash flow is dividend over a larger or lower rate generating smaller or higher amounts, respectively
