What Is the Present Value of an Infinite Stream of Annual

question 73

Multiple Choice

What is the present value of an infinite stream of annual payments of $10,000 per year if the first payment is received one year from today? Assume the interest rate is 10 percent.

• A)$100,000
• B)$1,000,000
• C)$10,000,000
• D)$1,000,000,000

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Definitions:

Equipment On Credit

The acquisition of machinery or equipment for business operations where payment is made through financing or on a deferred payment plan instead of upfront cash.

Debt-To-Equity Ratio

A measure used to evaluate a company's financial leverage, calculated by dividing its total liabilities by stockholders' equity.

Long-Term Debt

Financial obligations of a company that are due more than one year in the future, often in the form of loans or bonds.

Short-Term Debt

Financial obligations that are due for repayment within one year.