finance lec 2 - perpetuity

Question 1

what is a perpetuity

Answer 1

same payment made annually forecer

Question 2

perpetuituy aka known as

Answer 2

annuity that carries on forever

Question 3

in terms of perpetuity the gov may give you a kind of one but

Answer 3

you may never get the og money back but will get the same payment forever

Question 4

can a dividend be considered a perpetuity

Answer 4

yah

Question 5

how do we calc PV of a perpetuity

Answer 5

cashflow/r

Question 6

the perpetuity gives us value ….

Answer 6

1 year before 1st payment which will be present val if 1st payment from now

Question 7

if pv of a1milli perpetuity is 7.5 at 10% what can we say

Answer 7

ithis is the val of 1milly very year starting years from now

so if someone offering us this perpetuity and the interest is 10% we only willing to pay 7.5 milllion due to the time val of money

Question 8

the longer you wait for a cash flow

Answer 8

the lower the value

Question 9

if a perpetuity grows at a constant rate (g) wat is the calculation

Answer 9

cashflow/(r-g)