Your salary next year is expected to be $40,000. assume you expect your salary to grow at a steady rate of 4% per year for another 25 years. if the appropriate cost of capital (aka discount rate) is 9%, what is the pv today of your future salary cashflow stream? [for simplicity, assume the salary amounts are at the end of each of the next 25 years.] answer to nearest $1000.

246,000

247,000

391,000

553,000

800,000

correct option is d. 553,000

Explanation:

given data

expected salary = $40,000

steady rate = 4% per year

time = 25 year

discount rate =  9%

solution

we use here formula for present in tvm growing annuity problem is

present value = expected salary ÷ (  discount rate- steady rate ) - [ {expected salary × (1+steady rate)^time) ÷  (  discount rate- steady rate ) } ÷ ( 1+discount rate)^time)]    .................1

put here value we get

present value =

present value = $552,679 nearly by = $553,000

so correct option is d. 553,000

answer; post closing trial balance;