The Present Discounted Value of an Infinite Stream of Payments

question 94

Multiple Choice

The present discounted value of an infinite stream of payments of $5 per year when the interest rate is 20% is:

• A)1.
• B)5.
• C)25.
• D)100.

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Definitions:

Retained Earnings

The portion of a company's profits that is kept or retained rather than distributed to shareholders or used for investment.

Other Revenues and Gains

Accounts that record income from activities that are not part of a business's core operations.

Unrealized Gain

The potential profit on an investment that has not been sold, reflecting an increase in value on paper but not realized as cash.

Dividend Revenue

Income earned from holding shares of a company that pays dividends.