1. An investment offers a perpetual stream of $40,000 annual payments. The first payment will be received in 10 years. The interest rate is 4.5% per year. What is the value of this investment today?
888,888.89
598,137.26
572,380.16
598.137.27
None of the above.
2. What happens to a firm with high operating leverage when the overall level of sales is very high?
The firm will have a reduced level of depreciation.
The firm will not break even in accounting terms.
The firm is likely to have higher levels of fixed costs.
The firm is likely to enjoy high profits.