Mark Weinstein has been working on an advanced technology in laser eye surgery.

Question

Mark Weinstein has been working on an advanced technology in laser eye surgery. His technology will be available in the near term. He anticipates his first annual cash flow from the technology to be $169,000 received two years from today. Subsequent annual cash flows will grow at 2.9 percent in perpetuity.

What is the present value of the technology if the discount rate is 9 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

  Present value

$

Mark Weinstein has been working on an advanced technology in laser eye surgery. His technology will be available in the near term. He anticipates his first annual cash flow from the technology to be $169,000 received two years from today. Subsequent annual cash flows will grow at 2.9 percent in perpetuity.

Explanation / Answer

1st year PVGP=$169000(1.029)/(.09-.029)=$173901/0.061=$28,50,836.06

2nd year FV=$28,50,836.06+$169000=$3019836.06

no. year N= 2 year

Inerest discount (I)=9%=0.09

so Solve PV=FV/(1+Inerest)n=$3019836.06/(1.09)2==$3019836.06/1.1881=$25,41,735.60

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