To find the present value of an uneven series of cash flows, you must find the PVs of the individual cash flows and then sum them. Annuity procedures can never be of use, even some of the cash flows constitute an annuity (e.g., $100 each for years 3, 4, 5, and 6) because the entire series is not an annuity. Is this a correct statement? Explain.
Answer to relevant QuestionsHow has the study of finance changed since the beginning of the twentieth century?Explain the following statement: “Whereas a bond contains a promise to pay interest, common stock provides an expectation but no promise of dividends.”The present value of a perpetuity is equal to the payment on the annuity, PMT, divided by the interest rate, r: PVP=PMT/r. what is the sum, or future value, of the perpetuity of PMT dollars per year?Suppose that if rRF = 5% and rM = 12%. What is the appropriate required rate of return for a stock that has a beta coefficient equal to 1.5? What impact do investors’ expectations about inflation have on a firm’s cost of debt? Is the firm’s cost of equity affected? Explain.
Post your question