After the assassination of President John F. Kennedy, an \"eternal flame\" was p
ID: 2752569 • Letter: A
Question
After the assassination of President John F. Kennedy, an "eternal flame" was placed on his grave. It is a torch that should remain lit forever. Assume that the annual fuel and maintenance costs of the flame are $185, and that the cost of capital for the Foundation that maintains the flame is estimated to be 8%. What was the estimated present value of the cost of the eternal flame at the time that it was placed on President Kennedy's grave if the initial $185 outlay was made at the end of the first year?
Explanation / Answer
PV of perpetual cash flow = cash flow/interest rate = 185/.08 = 2312.5