The perpetuity principle, also known as the perpetual annuity or perpetuity, is a financial concept that refers to a series of equal cash flows that continue indefinitely into the future.
In the context of a company, the perpetuity principle can be applied to the calculation of the value of a company’s future earnings or cash flows.
The principle is based on the idea that a company’s earnings or cash flows can be thought of as a perpetual stream of payments that will continue indefinitely into the future.
In order to determine the present value of this stream of cash flows, the future cash flows must be discounted to their present value using an appropriate discount rate.
The perpetuity principle is used in the perpetual entity, company or corporation concept by te raise of a large abount of money invested into cash yielding at fixed rate assets such as real estate rentals.
