Curly’s Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs

Curly’s Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $25,000 per year forever. Assume the required return on this investment is 7.9 percent.

Required:

How much will you pay for the policy? (Do not include the dollar sign ($). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Paid for the policy

$

Explanation:

This cash flow is a perpetuity. To find the PV of a perpetuity, we use the equation:

PV = C / r

PV = $25,000 / 0.079

PV = $316,455.70