Present value of a perpetuity, Financial Accounting

Assignment Help:

PVA_∞ = A(1 + k)^-1 + A(1 + k)^-2+..... + A(1 + k⁾^∞^{+ 1}+ A (1 + k)_∞

Multiplying both the sides of Eq (a7) by (1+k) provides:

PVA_∞ = (1 +k) = A(1 +k) +A (1 +k)^-1 +......A (1 +k)^-∞⁺² +A(1 + k)^-∞⁺¹

Subtracting Eq (a7) from eq (a8) provides:

PVA_∞ k = A [1 - (1 + k)^∞]

As (1 + k)^-∞ → o eq.(a8) turns into:

PVA_∞ k = A

⇒ PVA_∞ = A/k

Related Discussions:- Present value of a perpetuity

Derivatives, On April 10, ABC inc. Enters in a swap contract for 10 years w...

On April 10, ABC inc. Enters in a swap contract for 10 years with a chartered bank to turn a fixed rate on liability of $150 million to floating rate. ABC wants to receive interest

Which actions are most likely to directly increase cash, Which of the follo...

Which of the following actions are most likely to directly increase cash as shown on a firm's balance sheet? Explain and state the assumptions that underlie your answer. 1. It i

Calculate annual constant probability and face value, Greek Debt Exchange ...

Greek Debt Exchange On the evening of February 20, 2012 private institutional investors, representatives of the IMF, ECB, and European governments agreed to a major "intervention"

Calculate the financial ratios, Part I: Wal-Mart Stores Inc.'s income stat...

Part I: Wal-Mart Stores Inc.'s income statement and balance sheet are attached. Gather relevant information from the financial statements to calculate the financial ratios, and co

TRADE AND PROFIT AND LOSS ACCOUNT, The following figures are taking from th...

The following figures are taking from the book of Sheen Compnay limited as on december 31,2009 DEBIT SIDE : opening stock Rs 75000 purchases 245000 wages 30000 c

Rules of intestacy-leaves several wives, Rules of intestacy:leaves several ...

Rules of intestacy:leaves several wives The intestate leaves several wives, married under any system of law which permits polygamy. His personal and household effects and the r

Objectives of inventory management, The twin objectives of inventory manage...

The twin objectives of inventory management are financial and operational. The operational objective implies that the materials and spares would be obtainable in sufficient quantit

How the following situations should be reported, You have just started work...

You have just started work for Warren Co. as part of the controller's group involved in current financial reporting problems. Jane Henshaw, controller for Warren, is interested in

Calculate infant mortality rate, Q. Calculate infant mortality rate? Mid...

Q. Calculate infant mortality rate? Mid year population 440000 Late fatal death 29 No. of live birth 5200 No. of infant death 423 No. of mate

Which depreciation method would produce the higher npv, Wendy is evaluating...

Wendy is evaluating a capital budgeting project that should last for 4 years. The project requires $ 800,000 of equipment. She is unsure what depreciation method to use in her anal

Write Your Message!

Name

Email id

Message

Verfication Code

User Account

All Pages