A firm receives a cash flow from an investment that will increase by 10 percent annually for an infinite number of years. This cash flow stream is called:

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Quizplus · Accepted Answer

A growing perpetuity is a cash flow stream that continues indefinitely and grows at a fixed rate each period. In this case, the cash flow is increasing by 10% annually for an infinite number of years, making it a growing perpetuity. An annuity due is a series of cash flows that occur at the beginning of each period, while an ordinary annuity occurs at the end of each period. A growing annuity is a series of cash flows that increases by a fixed percentage each period, but has a finite number of periods.

A Firm Receives a Cash Flow from an Investment That