**Formula of perpetuity:**

**When you wish to prove on an account of this being a real statement, the divide it by C,**

Multiplying the 3.5 equation by the factor which is (1 + *r*),

Subtracting the equation 3.5 from that of the equation given in 3.6,

This right hand side simplifies directly into the *r/r* that makes it a real statement.

Growing perpetuity on the other hand gives us a formula,

**Returning to the original definition, a perpetuity (growing) will pull out a (1 + ***g*) of the factor who is from the cash flows,

The *f* is replaced by using the very first of the formula,

This can be further simplified into,

Annuity is considered as a perpetuity value which will pay a fixed amount of $10 always in the starting of the first year.

Another thing that must be considered is that the perpetuity begins in the five years & pays $10 that is beginning at the 6^{th} year. If you are to purchase a total of $10 every year for the duration of 5 years, then that would be so for $0 every year after that year.

This will show that $10 is the beginning of the next coming year and in the ending of the 5^{th} year. And this value must account to,

This is in fact the annuity determining formula.

**Key terms**

**Solve now! Solutions**

**Problems**

**Links of Previous Main Topic:-**

- Introduction of corporate finance
- The time value of money and net present value
- Stock and bond valuation annuities and perpetuities

**Links of Next Financial Accounting Topics:-**

- A first encounter with capital budgeting rules
- Working with time varying rates of return
- Uncertainty default and risk
- Risk and return risk aversion in a perfect market
- Investor choice risk and reward
- The capital asset pricing model
- Market imperfections
- Perfect and efficient markets and classical and behavioral finance
- Capital budgeting applications and pitfalls
- From financial statements to economic cash flows
- Valuation comparables financial ratios
- Corporate claims
- Capital structure and capital budgeting in a perfect market
- The weighted cost of capital and adjusted present value in an imperfect market with taxes
- What matters
- Equity payouts
- For value financial structure and corporate strategy analysis
- Capital structure dynamics firm scale
- Capital structure patterns in the united states
- Investment banking and mergers and acquisitions
- Corporate governance
- International finance
- Options and risk management