Which One of These Statements Related to Growing Annuities and Perpetuities

question 28

Multiple Choice

Which one of these statements related to growing annuities and perpetuities is correct?

• A)The cash flow used in the growing annuity formula is the initial cash flow at time zero.
• B)Growth rates cannot be applied to perpetuities if you wish to compute the present value.
• C)The future value of an annuity will decrease if the growth rate is increased.
• D)An increase in the rate of growth will decrease the present value of an annuity.
• E)The present value of a growing perpetuity will decrease if the discount rate is increased.

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Definitions:

Manufacturing

The method of transforming unfinished materials, components, or pieces into final products that satisfy a customer’s expectations or standards.

Product Units

Discrete pieces or quantities of items that have been produced and are often counted, measured, or sold individually.

Flexibility of Practice

The capacity of a firm or practitioner to adjust and adapt procedures or methods in response to different situations or requirements.

Managerial Accounting

The practice of analyzing, interpreting, and communicating financial information to managers for the purpose of making informed business decisions.