If the Present Value of a Perpetual Income Stream Is

question 42

Multiple Choice

If the present value of a perpetual income stream is increasing, the discount rate must be ________.

• A) increasing
• B) decreasing
• C) changing unpredictably
• D) increasing proportionally

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Definitions:

Working Capital

The difference between a company's current assets and its current liabilities, representing the short-term financial health and operational efficiency of the business.

Salvage Value

The estimated resale value of an asset at the end of its useful life.

Initial Outlay

The upfront expenditure required to start a project, such as purchasing equipment or inventory, crucial for budgeting and financial planning.

Incremental Cash Flows

The additional cash flow a new project generates for an organization, which is critical for assessing its viability and profitability.