Which of the Following Is Not a Necessary Assumption Underlying

question 17

Multiple Choice

Which of the following is not a necessary assumption underlying the growing perpetuity formula?

• A)The required rate of return is greater than the expected growth rate of the cash flows.
• B)The investor will remain invested in the investment forever.
• C)The cash flows will grow at a constant rate indefinitely.
• D)All of the above are necessary assumptions underlying the growing perpetuity formula.

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Definitions:

Carrying Costs

The expenses incurred by holding inventory, including storage, insurance, and taxes.

Current Assets

Assets owned by a company that are expected to be converted into cash, sold, or consumed within one year or within the normal operating cycle of the business, whichever is longer.

Carrying Costs

Expenses associated with holding or storing inventory over a period.

Cash Budget

An estimation of cash inflows and outflows over a specific period, used to manage and plan for any potential surplus or deficit in cash.