Determine the present value of an annuity which pays out 12000 at the end of each year in perpetuity if the interest rate is 4% compounded annually. A. 320000 B. 312000 C. 310000 D. 318000 E. 300000

To determine the present value of an annuity that pays out $\$12000$ at the end of each year in perpetuity with an interest rate of $4\%$ compounded annually, we use the formula for the present value of a perpetuity:<br /><br />\[ PV = \frac{C}{r} \]<br /><br />where:<br />- \( PV \) is the present value,<br />- \( C \) is the annual cash payment,<br />- \( r \) is the interest rate.<br /><br />Given:<br />- \( C = \$12000 \)<br />- \( r = 4\% = 0.04 \)<br /><br />Substitute the given values into the formula:<br /><br />\[ PV = \frac{12000}{0.04} \]<br /><br />Calculate the present value:<br /><br />\[ PV = 300000 \]<br /><br />Therefore, the present value of the annuity is $\$300000$.<br /><br />The correct answer is:<br />E. $\$300000$