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 3 percent per year forever. Shrink, in contrast, promises her $1,300 in one year but the annual cash flow will decline by 2 percent forever. If her opportunity cost is 5 percent per year and both annuities cost $1,300, 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 $ v offers the greater value.

Q&A Education