a trust has been established to fund scholarships in perpetuity. the next annual distribution will be $1,200 and future payments will increase by 3 percent per year. what is the value of this trust at a discount rate of 7.4 percent?

In business, PV or also known as present value generally can be described as the current value of stream of cash flows or also a future sum of money given a specified rate of return. PV or also known as Present value takes the future value and applies a the interest rate or also a discount rate that could be earned if invested.

The calculation:

Present Value = Cf / (i - g)

Present Value = $1,200 / (7,4%-3%)

Present Value = $1,200 / (0.074 - 0.03)

Present Value = $27,272.73

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