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imported>Doug Williamson |
imported>Doug Williamson |
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| | Short selling means selling an asset that one does not already own. |
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| A perpetuity is similar to an annuity except that the fixed periodic cash flow starting one period into the future then carries on for ever (‘in perpetuity’) rather than stopping at a future point.
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| The present value of a fixed perpetuity is calculated - assuming a constant periodic cost of capital (r) for all periods from now to infinity - as:
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| Present Value = A<sub>1</sub> x 1/r
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| For a growing perpetuity the present value formula is modified to take account of the constant periodic growth rate starting from one period into the future to infinity as:
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| Present Value = A<sub>1</sub> x 1/[r-g]
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| where g = the periodic rate of growth of the cash flow.
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| The growing perpetuity concept is applied by the Dividend growth model for share valuation.
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| | (Short selling is contrasted with normal selling, which means selling an asset that one does already own.) |
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| == See also == | | == See also == |
| * [[Annuity]] | | * [[Short position]] |
| * [[Dividend growth model]] | | * [[Short]] |
| * [[Growing perpetuity]]
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| * [[Perpetuity due]]
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| * [[Perpetuity factor]]
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| * [[Simple annuity]]
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| [[Category:Corporate_finance]]
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| [[Category:Long_term_funding]]
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Revision as of 15:28, 31 October 2016
Short selling means selling an asset that one does not already own.
(Short selling is contrasted with normal selling, which means selling an asset that one does already own.)
See also
