Question
Every investment is made with an assumption about future benefits (i.e., future cash in-flows). We have learned about lump-sum cash flows, annuities and perpetuities. If
Every investment is made with an assumption about future benefits (i.e., future cash in-flows). We have learned about lump-sum cash flows, annuities and perpetuities. If we were able to look at Starbuck's estimate of future cash inflows associated with this investment, what do you think you would see:\ I. a single lump-sum cash in-flow at some point in the future;\ II. cash flows which reflect an annuity;\ III. cash flows which look like a perpetuity; or,\ IV. some combination of all of these?\ Please explain -- i.e., provide some rationale for your answer recognizing that all of us are making an educated guess about what benefits Starbucks is forecasting.
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