What is meaning of perpetuity, Financial Management

Assignment Help:

What is meaning of Perpetuity

If annuity is expected to go on forever then it is known as a perpetuity and then the above formula reduces to:

Present value: A/i

Perpetuities aren't very common in financial decision making as no project is expected to last forever however there could be a few instances where returns are expected to be for a long indeterminable period. Particularly when calculating the cost of equity perpetuity concept is very useful.

For a growing perpetuity formula changes to:

Present value: A / i-g

All these calculations take into consideration that cash flow is coming at the end of the period.

 


Related Discussions:- What is meaning of perpetuity

Explain factors affecting choice of a maximum cash balance, Explain the fac...

Explain the factors affecting the choice of a maximum cash balance amount. The maximum cash balance amount is defined by available investment opportunities, the expected return o

Evaluate alternative hedging strategies, Peak Inc. needs to order Canadian ...

Peak Inc. needs to order Canadian raw materials to use in its production process. The Canadian exporter typically invoices Peak in Canadian dollars. Assume that the current exchang

Impact of the yield level in bonds, Different bonds trade at differen...

Different bonds trade at different yields though the coupon rate, maturity, and embedded options are same for them. Assuming that all the other bond characteristi

Leverage, Evaluate the importance of leverage of financial management on a ...

Evaluate the importance of leverage of financial management on a small scale company.

Why do analysts calculate financial ratios, Why do analysts calculate finan...

Why do analysts calculate financial ratios? The comparative measures are known as Ratios. Since the ratios show relative value, they permit financial analysts to compare inform

Compute the weighted average cost of capital, Q. Compute the weighted avera...

Q. Compute the weighted average cost of capital? A company's subsequent to tax specific cost of capital are as follows: Cost of debt

Explain intuition behind the npv capital budgeting framework, What is the i...

What is the intuition behind the NPV capital budgeting framework? The NPV framework is a discounted cash flow method. The method compares the present value of all cash inflows

PV Annuity , What is the present value of an annuity that makes a quarterly...

What is the present value of an annuity that makes a quarterly payment of $37,110 for 11 years, assuming an annual yield to maturity of 5%?

Define the meaning of objective - financial management, Define the meaning ...

Define the meaning of objective - financial management The term objectives offers a normative framework. That is the focus in financial literature is on what a firm must try to

Describe in brief about finance, Describe in brief about  finance Mana...

Describe in brief about  finance Managing this flow of funds resourcefully is the purview of finance. So we can describe finance as the study of the methods that help us plan,

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd