An investment that generates a series of uniform and equal cash amounts is referred as

An investment that generates a series of uniform and equal cash amounts is referred as A.net present value. B.future value. C.cash flow. D.an annuity.

Answer

The correct option is : an annuity An annuity is equal series of payments over a fixed period of time at a specified interest rate where: Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate
Future value of annuity=Annuity[(1+rate)^time period-1]/rate Also; NPV=Present value of inflows-Present value of outflows where Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period) Cash flow means cash generated by the firm through sale of fixed asset,equipment etc and can happen for a single event/series of events and hence can not be necessarily termed as an annuity cash flow Also a future value can be discounted to the present value using discounting rate such as :

Present value=Future value*Present value of discounting factor(rate%,time period)

Leave a Comment