Given a cash flow stream X=(x₀,x₁,x_2.....x_n), a new stream X infinity of infinite length is made by successively repeating the corresponding finite stream. The interest rate is r. Let P and A be the present value and the annual worth, respectively, of stream X. Finally, let P infinity be the present value of stream X infinity. Find A in terms of P infinity and conclude that A can be used as well as P infinity for evaluation purposes.

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Lets start by defining the terms X x 0 x 1 x 2 x n is a finite cash flow stream X x 0 x 1 x 2 x n x 0 x 1 x 2 is the corresponding infinite cash flow ... View the full answer