Brain Teasers & Mental Math
A cash flow of $100 arrives next year and grows 3% forever. At an 8% discount rate, what is it worth today?
Model answer
$2,000.
Growing perpetuity (Gordon growth): PV = C₁ / (r − g) = 100 / (0.08 − 0.03) = 100 / 0.05 = $2,000.
Two gotchas interviewers probe: (1) the numerator must be NEXT year's cash flow…
The full, human-reviewed answer is in the bank.
Sign up free and Daily 10 serves you 10 questions a day from all 1,500+ — or go Pro for unlimited reps.
More from Brain Teasers & Mental Math
- You roll one fair six-sided die. What is the probability you roll a number greater than 4?
- Flip a fair coin twice. What is the probability of getting at least one head?
- Draw one card from a standard 52-card deck. What is the probability it is a face card (J, Q, or K)?
- Draw one card from a 52-card deck. What is the probability it is a heart OR a king?
- Roll two fair dice. What is the probability the two dice show the same number (a double)?
- A test for a disease is 99% accurate (99% sensitivity and 99% specificity). The disease affects 1 in 10,000 people. You test positive. What is the probability you actually have it?