PRC-2 · Chapter 6 · Question 24 of 45
In corporate investment appraisal, how is an expected stream of constant, equal annual cash flows continuing indefinitely into the future mathematically treated?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) As a perpetuity
Explanation
A series of constant, equal cash flows that is expected to last indefinitely (forever) is formally classified in corporate finance and discounting models as a perpetuity.
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