   Chapter 5, Problem 6Q Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

Solutions

Chapter
Section Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

The present value of a perpetuity is equal to the payment on the annuity, PMT, divided by the interest rate, I: PV PMT/I. What is the future value of a perpetuity of PMT dollars per year? (Hint: The answer is infinity, but explain why.)

Summary Introduction

To determine: The future value of perpetuity.

Introduction:

Perpetuity: This refers to the cash flows which occur at fixed regular intervals. These cash flows are of equal values and are for an indefinite period. Perpetuity is also called as the perpetual annuity.

Explanation
• The future value is that value of an investment which will be realized in future. The calculation of future value is very beneficial for making investment decisions.
• The perpetuity is the amount which is fixed and also occurs at regular intervals...

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