A centerpiece of any study of finance is "valuation." A simple function, "V=l/R," can be used to describe an asset's "value." What does the "R" in that expression stand for? a future cash flow O a current cash flow a market-determined discount rate O a variable income measure a measure of probability
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- Which of the following discounts future cash flows to their present value at the expected rate of return, and compares that to the Initial Investment? A. internal rate of return (IRR) method B. net present value (N PV) C. discounted cash flow model D. future value methodWhen using the NPV method for a particular investment decision, if the present value of all cash Inflows Is greater than the present value of all cash outflows, then _______ . A. the discount rate used was too high B. the investment provides an actual rate of return greater than the discount rate C. the investment provides an actual rate of return equal to the discount rate D. the discount rate is too lowThis calculation determines profitability or growth potential of an investment, expressed as a percentage, at the point where NPV equals zero A. internal race of return (IRR) method B. net present value (NPV) C. discounted cash flow model D. future value method
- What is an opportunity cost rate?How is this rate used in discounted cash flow analysis? Is the opportunity rate a single number that is used to evaluate all potential investments?Which method does not consider the time value of money? Choose the correct. A. Net present value B. Internal Rate of Return C. Average rate of return D. Profitability IndexThe principal of the time value of money is probably the single most important concept in financial management. One of the most frequently encountered applications involves the calculation of a future value. The process for converting present values into future values is called . This process requires knowledge of the values of three of four time-value-of-money variables. Which of the following is not one of these variables? The duration of the investment (N) The inflation rate indicating the change in average prices The present value (PV) of the amount invested The interest rate (I) that could be earned by invested funds
- The principal of the time value of money is probably the single most important concept in financial management. One of the most frequently encountered applications involves the calculation of a future value. A. The process for converting present values into future values is called . This process requires knowledge of the values of three of four time-value-of-money variables. Which of the following is not one of these variables? The inflation rate indicating the change in average prices The duration of the investment (N) The interest rate (I) that could be earned by invested funds The present value (PV) of the amount invested B. Investments and loans base their interest calculations on one of two possible methods: the interest and the. interest methods. Both methods apply three variables—the amount of principal, the interest rate, and the investment or deposit period—to the amount deposited or invested in order to compute…In a theoretical sense, the financial value of any asset is the present value of: Select one: A. Its past dividends B. Its expected cash flows C. Its expected sales price D. Its operating earningsWhat are: the payback method, the Accounting Rate of Return, and Discounted Cash Flow Model (Net Present Value and Internal Rate of Return)
- What is the vocabulary word for money that's in financial markets, and a rate of return for a specific investment?This is a generalized framework for analyzing the relationship between risk and return: a. capital asset pricing model b. diversification theory c. capital market line d. arbitrage pricing theoryWhy are the net present value and internal rate of return considered discounted cash flow methods?