A steady stream of earnings is:
A)capitalized at its future value as a perpetuity.
B)amortized at its present value as a perpetuity.
C)capitalized at its present value as a perpetuity
D)amortized at its present value as a perpetuity

Question

Quizplus · Accepted Answer

A steady stream of earnings can be capitalized at its present value as a perpetuity by using the formula PV = C/r, where PV is the present value, C is the amount of each payment in the stream of earnings, and r is the discount rate or the required rate of return. This formula assumes that the stream of earnings is perpetual, meaning that it continues indefinitely at a constant rate. By discounting the future payments back to their present value, we can determine the amount that should be invested today to receive the stream of earnings in the future.

A Steady Stream of Earnings Is