Which of the Following Is True About Perpetuities

question 28

Multiple Choice

Which of the following is true about perpetuities?

• A)A perpetuity does not generate cash flows every period infinitely.
• B)Since a perpetuity generates cash flows every period infinitely, there is no way to solve for the cash flow given the present value and the interest rate.
• C)Since a perpetuity generates cash flows every period infinitely, the cash flow generated equals the PV times the interest rate.
• D)Since a perpetuity generates cash flows every period infinitely, each cash flow must be discounted to calculate the present value.

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Definitions:

Family Businesses

Businesses owned and operated by multiple family members, often passed down from one generation to the next.

Shareholders

Individuals or entities that own share(s) of stock in a corporation, thus holding a portion of the ownership and rights to profits.

Disadvantages

are the unfavorable or negative aspects of a situation, plan, or condition that may cause difficulties or reduce chances of success.

Life Cycle

The series of changes in the life of an organism, including birth, growth, reproduction, and death; it can also refer to similar stages in the development of products or organizations.