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Corporate Finance quizzes

How businesses value future cash flows and use interest rates to compare financial choices.

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From Corporate Finance: Why Money Today Beats Money Tomorrow

A perpetuity pays 50 every year forever. At a 5% discount rate, what is it worth today?

  1. An infinite amount
  2. 1,000
  3. 2,500
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Answer: 1,000

A perpetuity's value is the payment divided by the rate: 50 divided by 0.05 is 1,000, because distant payments are worth almost nothing today.

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