[Retric]

Time value of money is generally used to account for this. If you discount future cash flows by ex: 5%/year then a steady income of 1$/year forever is not worth infinite money. Instead it's worth ~20$ and you capture 1/2 of that in the first 14 years.

Another approach is to assume a rate of failure etc, and build a more complex model, but it averages out to some discount on future cash flows.

[Scarblac]

> a steady income of 1$/year forever is not worth infinite money. Instead it's worth ~20$ and you capture 1/2 of that in the first 14 years.

You'd capture 14$ in the first 14 years...

[Retric]

In this model, the dollar you capture 14 years from now is woth .95^14 dollars. For simplicity let's assume your stock is going to creat 1$ 1 year from now. How much is that worth today?

Well if you sold a bond today for 95cents with the agreement to give a dollar in 1 year then next years dollar is worth 95 cents. Well what if you sold 2 bonds this year and one next year, you effectivly move up the future cash flow for the next two years at a discount that keeps getting larger the further back in time you pull the money.

[Scarblac]

Ah, I missed something. Thanks for the explanation!