What is the present value of a perpetual stream of cash flows that pays $2,500 at the end of year one and the annual cash flows grow at a rate of 3% per year indefinitely, if the appropriate discount rate is 12%?

Q: What is optimal capital budget?

A: Budget: The estimation of the income and expenditure of the particular future period and is…

Q: WHAT IS THE VALUE OF DISCOUNTED FLOWS

A: As per Time value of money, there are present values as well as future values.

Q: what about in terms of present value?

A: Present value helps us know the value of future cash flows in the present time. A higher interest…

Q: Define the term future value.

A: Future value (FV) is the value of a current asset at a future date based on an assumed rate of…

Q: What is net present value?

A:

Q: Define continuing value

A: The question is based on the concept of valuation of firm. The continuing valuation method is also…

Q: What is the horizon value? Why is it also called the terminal valueor continuing value?

A: Horizon value is the value of the expected dividend that will be received after the horizon date.

Q: What is the total investment approach?

A: Total Investment Approach: In the Total Investment Approach, there is a risk-return tradeoff in the…

Q: Define the term current market value.

A: The current market value (CMV) gives parties interested in making a transaction the approximate…

Q: What is the significance of finding the internal rate of return?

A: IRR helps to check the viability of the project. If IRR is more than Kc than Project seems to be…

Q: What is the concept of present value? What is discounting?

A: Present value means value of future cash flows in todays terms.

Q: What is current market value? Describe about it.

A: Market value: Market value is the price at which, both seller and buyer agree to exchange the…

Q: What is the math behind the net present value calculation?

A: Net present value is based on capital budgeting technique. Net present value is used to measure the…

Q: What is future value, FV?

A: Future Value: The future value is the value of the present amount compounded at an interest rate…

Q: how present value is useful in economic decision making

A: Present value (PV) is the current value of a future sum of money or a stream of cash flows, given a…

Q: Explain Target Return on Investment?

A: Investments are done to get the return on the same. Generally, investments are done when an…

Q: Explain prime rate

A: Introduction: Usually an interest rate is the amount that a lender pays calculated as a percentage…

Q: compare Future Value and Present Value?

A: The comparison between present value and future value is as follows:

Q: Which of the following is not a variable in the basic present value equation? Multiple Choice…

A: Investors are holding securities for the purpose of gaining the returns. The return is calculated…

Q: What do we mean by internal rate of return (IRR)?

A: Internal rate of return : Internal rate of return is one of the techniques used in capital budgeting…

Q: what is payback period

A: Capital Budgeting: It is the planning process used to determine whether an organization invests in a…

Q: Explain real rate of return

A: This is the raw rate of return adjusted with inflation. It is used to ascertain the effective return…

Q: Explain expected rate of return

A: Return: Return is defined as the money attained or lost on an investment through certain time…

Q: What is present value interest factor?

A: The present value interest factor is a mathematical equation used to estimate today's value of money…

Q: WHat is the NPVof this investment?

A: Given: Debt ratio 40% Required return 11% Cost of debt 6% Initial investment $48,000 Tax…

Q: Define the term Rate of Return?

A: Rate of Return:It means the benefit that is derived from the investment, benefit may be in terms of…