Starting from year 5, an investment will pay a $5,000 every year and it will happen forever. What’s the present value of the cash flows, if the annual discount rate is 5%?
This is called a "Perpetual Annuity".
$5,000 / 5% =$100,000. This is the value of this Perpetuity at the start of year 5.
PV =$100,000 / 1.05^4
PV =$82,270.25 - Its present value as of today. I have assumed that the $5,000 payment will start at the beginning of year 5, so that it would 4 years from now. If it starts at the end of year 5, then you will divide $100,000 / 1.05^5.
