Your investment in a small business venture will produce cash flows that increase by 15 percent every year for the next 25 years. This cash flow stream is called:

Question

Quizplus · Accepted Answer

A growing annuity is a cash flow stream that increases by a fixed percentage every year for a specified number of periods. This description matches the scenario presented in the question. An annuity due has payments at the beginning of each period, which is not the case here. A growing perpetuity is a cash flow that has no end date and also grows at a fixed percentage every year, which is not the case here since the cash flows only occur for 25 years. An ordinary annuity has payments at the end of each period, which is not the case here. Therefore, the correct answer is D) a growing annuity.

Your Investment in a Small Business Venture Will Produce Cash