Which of these are basic assumptions of the growing perpetuity present value formula?
I.The cash flow is the Time 0 cash flow.
II.The time periods are regular and discrete.
III.g

Question

Which of these are basic assumptions of the growing perpetuity present value formula?
I.The cash flow is the Time 0 cash flow.
II.The time periods are regular and discrete.
III.g < r
IV.The number of time periods is finite.

Quizplus · Accepted Answer

The growing perpetuity formula assumes that cash flow is received at regular and discrete time periods and that the growth rate is less than the discount rate. It does not assume that the cash flow is the Time 0 cash flow or that the number of time periods is finite. Therefore, options A, C, D, and E are incorrect. Option B includes only the correct assumptions.

Which of These Are Basic Assumptions of the Growing Perpetuity