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| ===== Fixed perpetuities =====
| | Abbreviation for business process re-engineering. |
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| A fixed perpetuity is a periodic cash flow starting one period in the future, then carrying on for ever - ‘in perpetuity’.
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| Each cash flow is an equal fixed amount.
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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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| where:
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| A<sub>1</sub> = Time 1 cash flow
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| r = periodic cost of capital
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| ===== Growing perpetuities =====
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| For a growing perpetuity, the present value formula is modified to take account of the constant periodic growth rate from one period in the future to infinity, as follows:
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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 in many contexts.
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| For example, the Dividend growth model for share valuation.
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| == See also == | | == See also == |
| * [[Annuity]] | | * [[Business process re-engineering]] |
| * [[Dividend growth model]] | | * [[Process strategy]] |
| * [[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]] | | [[Category:Technology]] |
| [[Category:Long_term_funding]]
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Latest revision as of 21:26, 25 September 2020
Abbreviation for business process re-engineering.
See also
