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- When faced with cash flows of equal magnitude occurring at different points in time, we prefer to: a. Receive it later than sooner b. Receive it sooner than later c. Pay it sooner than later d. Simplify the cash flows by summing them to determine the net cash flow.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.Define the term reinvestment rate and describe how it differs for any cash flow series between (1) a PW value calculated at the MARR, and (2) the IROR value i*.
- 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. MIRRTechnical problems associated with the internal rate of return include: a. the possibility of multiple IRRs, which rarely present practical difficulties b. the assumption that all cash flows are reinvested at the IRR c. neither of the above d. both of the aboveIf 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 period
- The IRR method assumes that cash flows are reinvested at _________. A. the internal rate of return B. the companys discount rate C. the lower of the companys discount rate or Internal rate of return D. an average of the internal rate of return and the discount rateWhy is it true, in general, that a failure to adjust expected cash flows for expected inflation biases the calculated NPV downward?The NPV method determines how much the present value of cash inflows exceeds the present value of costs. True False
- In solving measurement problems involving the use of annuities, which of these four required conditions are not accurate? Periodic cash flows are equal in amount. Time periods between the cash flows are the same length. Interest rate is constant for each time period. Interest is compounded at the beginning of each time period.In the discounted cashflow method, the discount rate is used for the following reasons EXCEPTa. it removes the timing differences of cashflows.b. it serves as the required rate of return of the asset being valued.c. it removes the expected riskiness of differing assetsd. it equalizes cash inflows to cash outflows so that the value would equal to the market value.To find NPV, it requires Choices: A.none of the choices B.discount rate and estimated cash flows C.investment amount plus discount rate D.discount rate and inflation rate E.estimated cash flow and capital structure
