Question

5.Would a typical common stock provide cash flows more like an annuity or more like an uneven cash flow stream? Explain. ​

Answer 1

Explanation:

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Answer 2

A typical common stock will provide an uneven cash flow stream.

Explanation:

• Common stock is a security that signifies ownership in a corporation. In a liquidation, common stockholders obtain whatever assets persist after bondholders, creditors, and preferred stockholders are paid.

• The definition of annuity comprises the words constant payment, which means payments that are equal at every period.

• Though there are many financial decisions engaged in uneven, or non-constant cashflows.  

• The dividends on common stocks classically increase over time, and investments in capital equipment nearly always generate uneven cashflows.