How do the cash flows of the time one perpetuity

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Reference no: EM131949000

Let PV be the present value of a growing perpetuity (the ‘time 1 perpetuity’) with an initial payment of C beginning one period from now and a growth rate of g. If we move all the cash flows back in time one period, the present value becomes PV*(1+r) Note that this is the present value of a growing perpetuity with an initial payment of C beginning today (‘time 0 perpetuity’).

Question: How do the cash flows of the time 1 perpetuity compare to those of the time 0 perpetuity from time 1 on?

Reference no: EM131949000

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