A fertilizer manufacturing company enters into a contract with a county parks and recreation department that calls for the company to sell 10 percent more of its best lawn feed every year for the next five years. If they also agree to maintain the total price as constant over the contract period, this growth in revenue is an example of a growing perpetuity.

Question

Quizplus · Accepted Answer

A growing perpetuity is an infinite series of increasing payments that continue indefinitely, while this contract only lasts for five years. Additionally, a perpetuity implies that the payments are constant and never change, while in this case the amount of lawn feed sold increases by 10% each year. Therefore, this growth in revenue is not an example of a growing perpetuity.

A Fertilizer Manufacturing Company Enters into a Contract with a County