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Calculate a perpetuity or stock value

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We often use a version of the perpetuity formula to value stock. That is, we consider a company as a "going concern" operating without an expected end, and paying out earnings to investors. A perpetuity is a constant stream of cash flows without end. Why doesn't it have an infinite value? (Stocks do not have an infinite value). Under what cases can we easily calculate a perpetuity or stock's value?

Reference no: EM132224227

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