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 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.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 16MC: When using the NPV method for a particular investment decision, if the present value of all cash...

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Why is it true, in general, that a failure to adjust expected cash flows for expected inflation biases the calculated NPV downward?
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.
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 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.
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.
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 above
Which 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 cost
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.
Which of the following statements correctly describes aspects of simple interest as discussed in lectures? Group of answer choices A) With simple interest, the future value of any cash flow is simply its current value discounted back at a rate of r% per period for n periods. B) None of the other statements are correct C) A loan that has been created that pays simple interest, will involve interest payments that are calculated on the basis of both the principal amount borrowed as well as any interest that has accumulated to date. D) By convention, simple interest is the main method used for the pricing of long-term bonds. E) More than one of the other statements are correct
The only time you change the original cash flow diagram in problems involving uniform series cash flows is when the:a. payment period is longer than the compounding periodb. payment period is equal to the compounding periodc. payment period is shorter than the compounding periodd. it may be done in any of the cases above, depending upon how the effective interest rate is calculated
All of the following statements regarding NPV are true EXCEPT:a. A positive NPV indicates the present value of the cash flows exceeds the initial investment.b. A negative NPV indicates the present value of the cash flows is less than the initial investment.c. An NPV equal to zero indicates the present value of the cash flows is equal to the initial investment.d. The internal rate of return is the discount rate that causes the initial investment to exceed the present value of the cash flows.
When a capital investment is expected to provide unequal annual cash inflows, the payback period cannot be calculated.True or False