Contrail Air Inc. runs a small drone manufacturing business. For this year, the company expects real net cash flow of $180,000. The company expects its cash flow to erode at a rate of 3% percent per year in perpetuity. The appropriate real discount rate for the company is 8% percent. Assume all cash flows received at the end of the year.
What is the present value of the cash flows?
Cash flow $180,000
Cash flow growth rate -3%
Required return 8%