Perpetuity: Perpetuity consists of equal cash flows that occur at regular time period and last for infinite time. There is continuous flow of equal amount of cash for infinite period. The flow of cash is perpetual in perpetuity. Present value of perpetuity: The present value of annuity measures the value of series of cash flow occurring at regular time period for infinite time at present time. It determines the today’s value of series of cash flows. Rate of return : Rate of returns is result from the investment. It measures whether the investment is generating expected return or not. It helps to finds whether the investments are profitable to firm or not. To determine: The rate of return on investment .

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Chapter 4, Problem 37P

Summary Introduction

Perpetuity: Perpetuity consists of equal cash flows that occur at regular time period and last for infinite time. There is continuous flow of equal amount of cash for infinite period. The flow of cash is perpetual in perpetuity.

Present value of perpetuity: The present value of annuity measures the value of series of cash flow occurring at regular time period for infinite time at present time. It determines the today’s value of series of cash flows.

Rate of return: Rate of returns is result from the investment. It measures whether the investment is generating expected return or not. It helps to finds whether the investments are profitable to firm or not.

To determine:

The rate of return on investment.

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