What is the reasoning behind the fact that an infinite stream of cash flows has a finite

Question:

What is the reasoning behind the fact that an infinite stream of cash flows has a finite present value?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Fundamentals of Corporate Finance

ISBN: 978-0133400694

1st canadian edition

Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford, David A. Stangeland, Andras Marosi

See More Books

Question Posted: Mar 31, 2017 02:20 PM

See More Questions

What is the reasoning behind the view that there is a trade-off between inflation and growth?
Answer each of the following questions about zero-base budgeting: (a) What is the reasoning behind the choice of the name zero base? (b) The zero-base approach asserts that for each budgeted...
For callable bonds, the financial press generally reports either the yield to maturity or the yield to call. Often yield to call is reported for premium bonds, and yield to maturity is reported for...
A sales invoice included the following information: merchandise price, $12,000; terms 1/10, n/eom, FOB shipping point with prepaid freight of $900 added to the invoice. Assuming that a credit for...
Use a continuous Fourier series to approximate the wave from in Figure. Plot the first three terms along with thesummation. -2
1 How did the style of the new chief executive alter the likelihood of a similar scandal arising?
6. The option to defer an investment reduces risk for a company because it does not need to commit the full investment outlay until there is more certainty about the true value of the underlying...
Le Monde Company is a manufacturer of chemicals for various purposes. One of the processes used by Le Monde produces HTP3, a chemical used in hot tubs and swimming pools; PST4, a chemical used in...
Inventory turnover and number of days' sales in inventory Financial statement data for years ending December 31 for Tango Company follow: 2017 2046 Cost of goods sold $3,525,900 $3,648,540...
Best Vision is revamping its assembly lines to improve efficiency. As shown below, there are 10 steps to assembling a television set. a. If Best needs to produce 120 televisions in a 40-hour work...
How do you calculate the net present value of a cash flow stream?
Consider again the setting of Problem 16. Now that you realize your best investment is to prepay your student loan, you decide to prepay as much as you can each month. Looking at your budget, you can...
You are running a hot Internet company. Analysts predict that its earnings will grow at 30% per year for the next five years. After that, as competition increases, earnings growth is expected to slow...
Financial strength can be defined as the capacity to produce enough cash flows and earnings to pay creditors, investors, and other debts, as well as to cover expenses. Even though sales by themselves...
The RMS Titanic was the most technologically advanced liner in the world in the year 1912. At 11:40pm or Sunday, April 14 of that year, the Titanic struck an iceberg and sank in less than three...
1. A management consultant is hired by a manufacturing firm to determine the best site for its next production facility. The consultant has had several meetings with the company's senior executives...
The figure below shows that a pump is used to transfer water from a reservoir at ground level to a storage take that is elevated. The pump is located 10 ft above the water surface of the reservoir...
P6-3 (Algo) Comparing and Contrasting the Effects of Inventory Costing Methods on Financial Statement Elements LO6-2, 6-3 Neverstop Corporation sells item A as part of its product line. Information...
Give a formula for each of the following compounds: (a) A soluble compound containing the bromide ion (b) An insoluble hydroxide (c) An insoluble carbonate (d) A soluble nitrate-containing compound...
Floyd Distributors, Inc., provides a variety of auto parts to small local garages. Floyd purchases parts from manufacturers according to the EOQ model and then ships the parts from a regional...
What is the difference between pro forma incremental earnings and pro forma free cash flow?
Why do we convert from incremental earnings to free cash flow when performing capital budgeting?
How does net working capital affect the cash flows of a project?
Los datos de la columna C tienen caracteres no imprimibles antes y despus de los datos contenidos en cada celda. En la celda G2, ingrese una frmula para eliminar cualquier carcter no imprimible de la...
Explain impacts of changing FIFO method to weighted average method in inventory cost valuations? Explain impacts of changing Weighted average method to FIFO method in inventory cost valuations?...
A perpetuity makes payments starting five years from today. The first payment is 1000 and each payment thereafter increases by k (in %) (which is less than the effective annual interest rate) per...

What is the reasoning behind the fact that an infinite stream of cash flows has a finite

Question:

Step by Step Answer:

The cash flows in the future are discounted for an ever increasing numbe...View the full answer

Fundamentals of Corporate Finance

Students also viewed these Corporate Finance questions