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- An increase in the discount rate will______ O a. Reduce the present value of future cash flows O b. Increase the present value of future cash flows c.Have no effect on net present value Od. Compensate for reduced riskWhich of the following is not a factor in explaining why the present value of a future dollar is less than one dollar?A. InterestB. Inflation C. Risk of failure to receive expected cash inflows D. Historic costAn increase in the discount rate will____ a. Reduce the present value of future cash flows b. Increase the present value of future cash flows c. Have no effect on net present value d. Compensate for reduced risk
- Assuming that we are not able to accurately predict cash flows , generally decreased risk is thought to A. Increase interest rates B. Increase present value C. Decrease present value D. Increases cash flowsIf cashflows are discounted at____ the net present value is zero a. Internal rate of return O b. Wighted average cost of capital O c. Higher payback period O d. Any payback period24 The likely effect of discounting nominal cash flows with real interest rates will be to: A make an investment's NPV appear less attractive. B. make an investment's NPV appear more attractive. C correctly calculate an investment's NPV, regardless of expected inflation. D correctly calculate an investment's NPV if inflation is expected. OA OB о с OD
- Consider the calculation of an external rate of return (ERR). The positive cash flows in the cash flow profile are moved forward to t = n using what value of i in the (F|P,i,n–t) factors? a. 0 b. The unknown value of ERR (i′) c. MARR d. IRR.Which of the following statements correctly describe how the present value of a future expected cash flow may vary with different factors? Group of answer choices A. More than one of the other options are correct. B. As the expected loss of purchasing power due to inflation increases, then, holding all else constant, the present value of a future expected cash flow will decrease. C. As the period of time we have to wait until we receive a future expected cash flow decreases, then, holding all else constant, the present value of the cash flow will decrease. D. As the risk associated with a future expected cash flow increases, then, holding all else constant, the present value of the cash flow will increase.All else equal, as market interest rates fall, the present value of a future cash flow the statement. A B C Increases Decreases Does not change Select the answer that best completes
- If cashflows are discounted @ the net present value is zero. O a. RATE OF BORROWING O b. COST OF EQUITY O c. IRR O d. MIRR37. ‘Liquidity’ in financial terms is: A. a feature of money only B. the best measure of risk of a financial asset C. the ease with which an asset can be sold at the published market price D. to lower the rate of return for an assetThe Profitability Index (PI) is a financial metric that depends only on the Present Value (PV) of expected future cash inflows. This statement is: a False. b Only partly true. c True d Only partly false.