Discounted Cash flow Valuation - Valuing Level Cash Flows: Annuities and Perpetuities

4 important questions on Discounted Cash flow Valuation - Valuing Level Cash Flows: Annuities and Perpetuities

What is the defenition of Annuity?

A series of constant or level cash flows that occur at the end of each period for some fixed number of periods. Appear often in financial agreements and are useful shortcuts for determining their values.

more correctly, the cashflows are said to be in ordinary annuity form

Where does PVIFA (r,t) stand for?

present value interest factor for annuities

Explain how an annuity table looks like:

See table:
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What is a Perpetuity?

An annuity in which the cash flows continue forever.

perpetuities are also called consols, particularly in the United Kingdom

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