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

Calculate the net present value for an investment project, Calculate the ne...

Calculate the net present value for an investment project with the following cash flows using a 12 percent cost of capital: Year 0 1

System one-the head office maintains all the accounts, SYSTEM ONE-THE HEAD ...

SYSTEM ONE-THE HEAD OFFICE MAINTAINS ALL THE ACCOUNTS This system is suitable for an enterprise that has small branches (possibly in another area of the town or city where the

Trustees remuneration-trusts laws and accounts, Trustees remuneration A...

Trustees remuneration A trustee may not receive remuneration except: 1. By order of the court, if the trust is very onerous or the services of the trustee very valuable;

Liquidity ratios, Liquidity Ratios - These ratios include the Current Rat...

Liquidity Ratios - These ratios include the Current Ratio and the Quick Ratio or the acid test ratio. Liquidity ratios show the Liquid position of a company in the short term i.e

Explain briefly two methods of calculating depreciation, QUESTION 1: Th...

QUESTION 1: The Alpha Company Ltd was registered with Nominal Capital of 60,000 Equity shares of Rs.10 each. The following were the ledger balances on 31st March 2011.

Calculate total hourly cost of industrial parts, McM Cog is a supplier of i...

McM Cog is a supplier of industrial parts. Most orders are received at a call center. The call center currently has 10 phone lines total, i.e., a maximum of 10 callers may be in t

The statement of affairs-bankruptcy accounts, The Statement of Affairs ...

The Statement of Affairs The statement of affairs sets out: (a) The various assets of the debtor, at the values they are expected to realise; (b) The creditors, classified acc

Historical cost accounting, definition of historical cost accounting

definition of historical cost accounting

Difference between a static budget and a flexible budget, XYZ Enterprises m...

XYZ Enterprises manufactures tires for the Formula One motor racing circuit. For August 2011, XYZ budgeted to manufacture and sell 3,000 tires at a variable cost of $74 per tire an

Ideal minority interest, IDEAL MINORITY INTEREST The minority interest id...

IDEAL MINORITY INTEREST The minority interest ideally is entitled to the profit after tax in minority interest. However due to consolidation, the profits of the subsidiary compan

Write Your Message!

Name

Email id

Message

Verfication Code

User Account

All Pages