Annuities & Perpetuities: Understanding cash flow streams
Present Value Calculation of Cash Flows 1. Perpetuity (₹10,000 annually, starting in Year 5) PV = C / r PVYear 4 = 10,000 / 0.08 = 1,25,000 Discounting to Year 0: PV = 1,25,000 / (1.08)^4 = 91,871 2. Annuity Due (₹20,000 for 8 years, starting immediately) : Using financial calculator: Set calculator to Annuity…