As the discount rate increases, the present value of a future cash inflow Question 13 options: A) is unchanged. B) gets smaller. C) gets larger.
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As the discount rate increases, the present value of a future
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- Question 1 Consider the cash flows in selections 1 through 4. In each case, the first cash flow occurs at the end of the first period, the second cash flow at the end of the second period, and so on. Which of the following selections has the lowest PRESENT VALUE if the discount rate is 10%? Question 1 options: $100; $100; $100; $100 $0; $0; $0; $500 $350; $0; $0; $0 $50; $50; $50; $375 Question 2 Consider two investment opportunities, Investment A and Investment B. Investment A pays interest at the rate of 18% per year, compounded quarterly. Investment B pays interest at the rate of 17.8% per year, compounded monthly. Which investment provides the better return? Question 2 options: Investment A Investment B Both provide the same return. There is not enough…QUESTION . Al-Salam is expecting the following cash flows starting at the end of the year BD 133,245; 152,709; 161,554, and 200.760. If their discount rate is 9.4%, find the future value of these cash flowsConsider the following future value problem. The respective cash flows for t = 0, 1, 2, and 3 are $3,000, $2,000, $8,000, and $5,000 and the discount rate is ten percent. What is the future value at t = 4? do not use excel
- Quantitative Problem: You own a security with the cash flows shown below. 0 1 2 3 4 0 690 395 230 320 If you require an annual return of 12%, what is the present value of this cash flow stream? Do not round intermediate calculations. Round your answer to the nearest cent.Consider the following cash flows: Year Cash Flow 0 –$ 32,000 1 14,200 2 17,500 3 11,600 a. What is the NPV at a discount rate of zero percent? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b. What is the NPV at a discount rate of 10 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the NPV at a discount rate of 20 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. What is the NPV at a discount rate of 30 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)Consider the following cash flows: Year Cash Flow 0 −$28,300 1 15,400 2 13,500 3 9,900 a. What is the profitability index for the cash flows if the relevant discount rate is 9 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) b. What is the profitability index if the discount rate is 14 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) c. What is the profitability index if the discount rate is 25 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.)
- Consider the following cash flows: Year Cash Flow 0 −$ 29,000 1 14,700 2 14,200 3 10,600 What is the profitability index for the cash flows if the relevant discount rate is 10 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. What is the profitability index if the discount rate is 15 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. What is the profitability index if the discount rate is 22 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.The cash flows for two alternatives X and Y are shown in the table displayed here. Year: 0 1 2 3 4 5 Alternative X: -$3,000 900 900 900 900 1,300 Alternative Y: -$5,000 1,400 1,400 1,400 1,400 2,100 Write an equation using appropriate compound-interest factors that could be used to solve for the incremental rate of return (ΔIRR) associated with these two alternatives. Do NOT solve this equation for ΔIRR.4. Present value Finding a present value is the reverse of finding a future value. Which of the following is true about finding the present value of cash flows? -Finding the present value of cash flows tells you what a cash flow will be worth in future years at a specified rate of return. -Finding the present value of cash flows tells you how much you need to invest today so that it grows to a given future amount at a specified rate of return. Which of the following investments that pay will $18,000 in 4 years will have a lower price today? -The security earns an interest rate of 4.00%. -The security earns an interest rate of 6.00%.
- 16)For the following stream of free cash flows, calculate the internal rate of return. Year 0 1 2 3 4 5 Free Cash Flows -45,452 10,005 14,921 12,537 10,452 21,455 Group of answer choices 14.5% 12.7% 13.9% 11.5%Year Cash Flow 0 –$ 17,200 1 9,500 2 8,400 3 4,900 a. What is the profitability index for the set of cash flows if the relevant discount rate is 10 percent? b. What is the profitability index for the set of cash flows if the relevant discount rate is 15 percent? c. What is the profitability index for the set of cash flows if the relevant discount rate is 22 percent?3. Present value Finding a present value is the reverse of finding a future value. Which of the following is true about finding the present value of cash flows? Finding the present value of cash flows tells you how much you need to invest today so that it grows to a given future amount at a specified rate of return. Finding the present value of cash flows tells you what a cash flow will be worth in future years at a specified rate of return. Which of the following investments that pay will $18,500 in 8 years will have a higher price today? The security that earns an interest rate of 8.50%. The security that earns an interest rate of 12.75%. Eric wants to invest in government securities that promise to pay $1,000 at maturity. The opportunity cost (interest rate) of holding the security is 13.80%. Assuming that both investments have equal risk and Eric’s investment time horizon is flexible, which of the following investment options will…
