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Thread: Present Value of a Perpetuity

  1. #1
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    Default Present Value of a Perpetuity

    Present value is defined as K/i where K is the annual cash flow and i is the discount rate.

    How would this formula change if the cash flow happens lets say evey 8 years in prepetuity (instead of every year). Thank you.

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    Default Re: Present Value of a Perpetuity

    why should the formual change. Remeber it is for perpetuity. But if you wanted you could divide K by 8

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    Default Re: Present Value of a Perpetuity

    I was thinking about it. We have to first convert the every 8 yr cashflow to a yearly cashflow which can then be used by using the perpetuity formula.

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