Final answer:
The value of a perpetuity is equal to the sum of the present value of its expected future cash flows.
Step-by-step explanation:
The value of a perpetuity is equal to the sum of the present value of its expected future cash flows. To calculate the present value of a perpetuity, you need to determine the cash flow per period and the discount rate. Then, you can use the formula:
PV = Cash Flow / Discount Rate
For example, if a perpetuity pays $100 every year and the discount rate is 5%, the present value would be $2,000 ($100 / 0.05). By adding up the present values of all future cash flows, you can calculate the value of the perpetuity.