Question

Show that the present value of a continuous income flow lasting for N years at the constant rate of Y dollars and discounted
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Answer #1

we can show the equation validity with an example:

N-3 years

r-6% annually

y-100

(1-1/(1+r) pu = a/r

(1-1/(1+0.06) pu = 100/0.06 *

py = 267

Hence the formula so provided for calculation of present value of continuous income has been proved with the above example.

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