Between 2027 and 2035, the project generates bimonthly revenues that are 4% higher each year than in the previous year. For valuation purposes, you approximate each year’s six bimonthly payments by a single annual payment at year-end equal to that year’s total.

How should this block of cash flows (from 2027 to 2035) be modeled in order to obtain its present value at 1 January 2026?

Question

Between 2027 and 2035, the project generates bimonthly revenues that are 4% higher each year than in the previous year. For valuation purposes, you approximate each year’s six bimonthly payments by a single annual payment at year-end equal to that year’s total. 
   
 How should this block of cash flows (from 2027 to 2035) be modeled in order to obtain its present value at 1 January 2026?

Answer

As a single lump sum at the end of 2035

Answer

As an annuity of annual payments, with no growth

Answer

As a growing perpetuity of annual payments starting in 2027, with a 4% growth rate per year

Answer

As a finite growing annuity of annual payments (2027–2035), with a 4% growth rate per year

Crowdly

Between 2027 and 2035, the project generates bimonthly revenues that are 4%...

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