Question 2 (15 marks) (a) A perpetual annuity is a stream of cash flows that continues forever An important feature of any perpetual annuity is that you cannot compute the future value of its cash flows because it is infinite Explain why perpetual annuity has a well defined present value and show its formula by applying the equal payment series present worth factor and a diagram (3 marks) (b) Use your own words with an example compose a summary of no more than 100 words contrasting between concepts of perpetual annuity and the accounting term going concern (12 marks) Rubrics and Marking Marks will be given to the (a) correct derivation working steps and correct formula diagram (b) relevant contrasting argument(s) with appropriate explanations

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Question: Question 2 (15 marks) (a) A perpetual annuity is a stream of cash flows that continues forever. An important feature of any perpetual annuity is

Question 2 (15 marks)

(a) A perpetual annuity is a stream of cash flows that continues forever. An important feature of any perpetual annuity is that you cannot compute the future value of its cash flows because it is infinite. Explain why perpetual annuity has a well-defined present value and show its formula by applying the equal-payment-series present-worth factor and a diagram. (3 marks)
(b) Use your own words with an example compose a summary of no more than 100 words contrasting between concepts of perpetual annuity and the accounting term going-concern. (12 marks)

Rubrics and Marking:

Marks will be given to the (a) correct derivation / working steps and correct formula / diagram; (b) relevant contrasting argument(s) with appropriate explanations.

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