Definition for : Perpetuity

Perpetuity is a constant stream of Cash flows without end. Its Value can be calculated as follows: PV = F/k, where F is the amount of Cash flow, k – the Discounting rate. The Value of a perpetuity growing at a constant rate g can be calculated as follows: PV = F/(k-g), as long as k > g.

(See Chapter 16 The time value of money and net present value of the Vernimmen)

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