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A company in a mature business with a constant dividend might be valued using the formula...

A company in a mature business with a constant dividend might be valued using the formula for a Perpetuity. A Perpetuity ____

A has no Future Value and an infinite Present Value

B has a finite Future Value and an infinite Present Value

C increases in present value amount as the required rate of return (discount rate) increases

D increases in value as the required rate of return (discount rate) decreases

Solutions

Expert Solution

Perpetuity is Cash flow/required rate of return

If the rate of return will decrease the value of perpetuity will increase.

The answer is-

D increases in value as the required rate of return (discount rate) decreases

jeff jeffy answered 2 years ago
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