Final answer:
The capitalized value of an infinitely long uniform series of cash flows is called the a. present value of the series. The present value represents the current worth of the future cash flows.
Step-by-step explanation:
The correct option is a. Present.
The present value (or capitalized value) of an infinitely long uniform series of cash flows is called the present value of the series. It represents the current worth of the future cash flows. In the given question, the series of cash flows is the payments from the firm over multiple years.
To calculate the present value of the series, we use the present value formula:
Present Value = Cash Flow / (1 + Interest Rate)number of years
For example, to calculate the present value of $20 million received in one year, with an interest rate of 15%, we can substitute the values into the formula:
Present Value = $20 million / (1 + 0.15)1 = $17.39 million.
We can repeat this calculation for each cash flow in the series and add them up to find the capitalized value of the series.