CAF-7 · Chapter 13 · Question 12 of 15
What does a 'Perpetuity Factor' allow a financial analyst to calculate?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) The present value of an equal, regular cash flow that continues forever into infinity
Explanation
A perpetuity is an annuity that goes on forever. The perpetuity factor (calculated as 1 / r) allows an analyst to take a constant annual cash flow expected to last into infinity and express it as a single, finite present value today.
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