Alysha has been offered two perpetuities: Grow and Shrink. Grow promises her $200 in one year and an annual cash flow th

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Alysha Has Been Offered Two Perpetuities Grow And Shrink Grow Promises Her 200 In One Year And An Annual Cash Flow Th 1 (93.29 KiB) Viewed 27 times

Alysha has been offered two perpetuities: Grow and Shrink. Grow promises her $200 in one year and an annual cash flow that will increase by 4 percent per year forever. Shrink, in contrast, promises her $2,000 in one year but the annual cash flow will decline by 2 percent forever. If her opportunity cost is 6 percent per year and both annuities cost $2,000, which annuity offers her the greater value? (Round "Shrink cost" to 2 decimal places, e.g. 125.12 and other answer to O decimal places, e.g. 12,512) Grow exceeds the cost by $ Shrink exceeds the cost by $ ✓offers the greater value.