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

Help ASAP, If firm A has a higher debt-to-equity ratio than firm B then tha...

If firm A has a higher debt-to-equity ratio than firm B then that means what

What is the required rate of return on the project, The risk free rate is 1...

The risk free rate is 10 percent and the expected return on the market portfolio is 14 percent. A firm considers a project that is expected to have a beta of 1.3, whereas the beta

What number of seats generates that maximum revenue, Q. In planning a resta...

Q. In planning a restaurant, it is estimated that a revenue of $6 per seat will be realized if the number of seats is at most 50. On the other hand, the revenue on each seat will d

Sophisticated methods of mortgage backed security valuation, MBS ...

MBS are the most complicated securities that are sensitive to interest rates. The factors that affect the price of MBS are varied and most of th

Define when u.s. dollar weakens in foreign exchange market, What does it me...

What does it mean when the U.S. dollar weakens in the foreign exchange market? While the U.S. dollar weakens in the foreign exchange market one U.S. dollar buys smaller amount un

Time series and demand forecasting, Time Series and Demand Forecasting ...

Time Series and Demand Forecasting   The process of budgeting in many organizations starts with a forecast of demand for the products in the forthcoming year and the sales f

Diffrence between present values of future cash, Q. Diffrence between prese...

Q. Diffrence between present values of future cash ? The difference among the present values of future cash inflows generated by an asset and its cost is known as net present v

Plan for financial management, 1. Review and analyse financial data for the...

1. Review and analyse financial data for the last year to establish areas which have generated a profit or loss in your organisation. 2. Conduct a research to review reasons for

Important factors for successful budgetary control, IMPORTANT FACTORS FOR ...

IMPORTANT FACTORS FOR  SUCCESSFUL BUDGETARY CONTROL 1. Clearly defined organization structure. 2. Top management support. 3. Reporting of deviations 4. Efficient acco

Liquidity of a company, Eco Tyre Ltd. (ETL) - incorporated in year 2003 and...

Eco Tyre Ltd. (ETL) - incorporated in year 2003 and entered into automobile tyre manufacturing business by introducing a new tire manufacturing technology. Over the years, ETL has

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