The if() function
The present value of a growing perpetuity has the following formula:
Here, C is the first cash flow occurring at the end of the first period, R is the effective periodic rate, and g is the constant growth rate. The second and the third future cash flows will be and , respectively. A necessary condition for the correctness of equation (3) is that the discount rate should be greater than the growth rate, that is, R should be greater than g. What is the present value if C is $10, R is 10 percent, and g is 12 percent? The wrong answer is -500. For these similar cases, we could use the if()
function to print an error message instead of offering the wrong answer, as shown in the following code:
def pv_growing_perpetuity(c,r,g): if(r<g): print("r<g !!!!") else: return(c/(r-g))
We could try different sets of input values, as shown in the following code:
>>>pv_growing_perpetuity(10,0.1,0.08) 499.9999999999999 >>>pv_growing_perpetuity...