To find the present value of an uneven series of cash flows, you must find the PVs of the individual cash flows and then sum them. Annuity procedures can never be of use, even when some of the cash flows constitute an annuity, because the entire series is not an annuity. True or false? Explain.
Q: Relevant cash inflows and outflows in a discounted cash flow analysis are the differences in…
A: True
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Q: How can we find the present worth of any uneven stream of payments?
A: The question is based on the concept of present value of uneven cash flow
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A: Solution:- Net Present Value (NPV) means the net of the present value of cash inflows and initial…
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A: Answer :- YES
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Q: what is the best thing to consider in solving general ordinary annuity?
A: Annuity means a set of finite number of payments which are the same in size and made in equal…
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A: Present Value of Perpetuity: It represents the present worth of the perpetual cash flow stream. It…
Q: 10
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Q: A perpetuity is a level stream of evenly spaced cash flows that never ends. True False
A: Perpetuity is a stream of cash flow that continues for an infinite period of time.
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A: Answer: The correct option is (4) All of the above.
Q: echnical problems associated with the internal rate of return include:
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A: IRR (Internal Rate of Return):
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Q: To find the present value of an uneven series of cash flows, you must find the PVs of the individual…
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Q: Give an example for Ordinary Present Value of Annuity from your own understanding.
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To find the present value of an uneven series of cash flows, you must find the PVs of the individual cash flows and then sum them.
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- Which of the following statements is CORRECT? a. The future value of an annuity table is most useful in the short-cut calculation of the future value of uneven cash flows. b. The formula or equation for the calculation of the present value can be used only in even cash flows that are paid or received at regular time intervals and subject to a constant discount rate. c. The present value of an annuity table is most useful in the short-cut calculation of the present value of uneven cash flows. d. The formula or equation for the calculation of the future value can be used also in regular annuity and subject to a fluctuating rate of return.Which of the following arguments about time line is right?Group of answer choices a)Time line can be construct for annuity only. b)Time line is useful no matter the payment is constant or not. C)Time line is useless when the cash flow is uneven. d)Time line is only useful when the payment is constant.Which of the following characteristics is a necessary feature for pricing a set of cash flows as an ordinary annuity? Group of answer choices The period of time between each cash flow must not vary. More than one of the other options are correct. The cash flows must not be a fixed, regular amount. The cash flows must occur on a yearly basis.
- Which of the following statements is CORRECT? Some of the cash flows shown on a time line can be in the form of annuity payments, but none can be uneven amounts. A time line is not meaningful unless all cash flows occur annually. Time lines are not useful for visualizing complex problems prior to doing actual calculations. Time lines cannot be constructed in situations where some of the cash flows occur annually but others occur quarterly. Time lines can be constructed for annuities where the payments occur at either the beginning or the end of the periods.Which of the following statements are true regarding the payback period of an investment? It does not account for the time value of money No objective criteria exists for what is an acceptable payback period Cash flows occurring after the payback period have no impact on the payback computation All of the aboveWhen 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 low
- Describe the essential differences between the following cash flow streams: Annuity versus perpetuity Annuity due versus ordinary annuity Illustrate with an example each.The payback period method has been criticized for not taking the time value of money intoaccount. Could this limitation be overcome? If so, would this method then be preferable to theNPV method?Based on your understanding of the fAactors that affect the cost of money, Identify which of the following statement is true. a. higher inflation leads to lower interest rates. b. Interest is the price paid to borrow funds. c. Higher risk leads to lower interest rates.
- Which of the following statements is CORRECT? a. One defect of the IRR method versus the NPV is that the IRR does not take account of the time value of money. b. One defect of the IRR method versus the NPV is that the IRR does not take account of the cost of capital. c. One defect of the IRR method versus the NPV is that the IRR values a dollar received today the same as a dollar that will not be received until sometime in the future. d. One defect of the IRR method versus the NPV is that the IRR does not take proper account of differences in the sizes of projects. e. One defect of the IRR method versus the NPV is that the IRR does not take account of cash flows over a project's full life.Investing is a risky business, so investors must be ready to accept that future investment cash flows may be uncertain and unpredictable. This being case, what is the best way to evaluate the value of such an investment? A. Determine the future value of the individual anticipated cash flows at a minimum acceptable rate of return B. Convert the individual future cash flows in a perpetuity and determine the present value of the perpetuity C. Convert the individual future cash flows into an annuity and determine the present value of the annuity D. Determine the present value of the individual anticipated cash flows at a minimum acceptable rate of returnIn 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.