To calculate the present value (PV) of the given cash flow stream, we can use the formula for the present value of a growing perpetuity. The formula is:

$PV = \frac{C}{r - g}$

Where:

• $C$ is the cash flow one period from now ($286).
• $r$ is the risk-free rate (6% or 0.06).
• $g$ is the growth rate of the cash flows (2% or 0.02).

Step-by-step calculation:

1. Identify the values: $C = 286,\quad r = 0.06,\quad g = 0.02$

2. Apply the formula: $PV = \frac{286}{0.06 - 0.02} = \frac{286}{0.04}$

3. Calculate the result: $PV = 7150$

Thus, the present value of the cash flow stream is $7,150.

Let me know if you want further details or have any questions.

Here are 5 related questions:

1. How would the present value change if the risk-free rate increases to 8%?
2. What happens to the PV if the growth rate increases to 3%?
3. How is this formula for a growing perpetuity different from a regular perpetuity?
4. Can the formula be applied if the growth rate exceeds the risk-free rate?
5. How would you calculate the PV if the inflows stopped after a certain number of periods?

Tip: In a growing perpetuity, the growth rate must always be less than the discount rate for the formula to work!