Which statement characterizes the time value of money concept? A) The future value of a present dollar is less than one dollar. B) The present value of a future dollar is less than one dollar. C) The timing of cash flows is not relevant to decision making. D) None of the above

Which statement characterizes the time value of money concept? A) The future value of a present dollar is less than one dollar. B) The present value of a future dollar is less than one dollar. C) The timing of cash flows is not relevant to decision making. D) None of the above

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter12: Capital Investment Decisions

Section: Chapter Questions

Problem 11MCQ

See similar textbooks

Related questions

Q: What should the net change in cash section of the statement of cash flows always reconcile with?

A: Cash flows statement is a summary statement which provides details of all the cash inflows and cash…

Q: In general, there are several ways to address a particular sequence of cash flows in order to…

A: Cash flow is the net amount that is received and paid from operating, investing, and financing…

Q: Identify which from the following scenarios depict relevant cash flows in making the decision…

A: While making decision for accepting two alternatives, we always consider relevant cost and relevant…

Q: How can we convert any cash flow elements in constant dollars into actual dollars?

A: The cash flow elements are the constant value that can be converted into actual value by adjusted…

Q: If you disounted a set of positive real cash flows with a nominal discount rate and inflation were…

A: Justification:Suppose the positive cash flows are discounted with the inflation rate, which is…

Q: What are the two drawbacks associated with the payback period a. The time value of money is…

A: Payback period is one of the capital budgeting techniques which represent the time or years cash…

Q: What happens to cash if the value of other current assets rises? Is it possible that current assets,…

A: Here is the answer :

Q: Why is this statement false? The balance sheet shows why cash increased or decreased.

A: Financial statements are the reports that indicate the financial position of the business. The…

Q: What are the two principal reasons for holding cash? Can a firm estimate its target cash balance by…

A: It refers to the level of cash that the company should maintain to determine the tradeoff between…

Q: Of the following questions, which one would not be answered by the statement of cash flows? A.…

A: Statement of cash flow shows the cash outflows and cash inflows of the business entity.

Q: Is the value of money affected by time, and if it is, in which direction? O a. It is not affected O…

A: The value of time of money is the idea that the money currently available is worth more than the…

Q: 10

A: Cash flow refers to the total amount of cash and its equivalents that travel in and out of a company…

Q: How much would the ending cash balance be based on the above information?

A: Statement of cash flow: It refers to a financial statement that shows all the cash payments and…

Q: Which of the following returns is consistent with contractual cash flows that are SPPI? I. Return…

A: The Solely Payment of Principal and Interest test requires that the contractual terms of the…

Q: In the net present method future, cash flows are discounted to their present value a)TRUE b) FALSE

A: Under net present value method all future cash flows are discounted to their present value .

Q: c. Use arrows to demonstrate, on the time line in part b, how discounting to find present value can…

A: NPV or Net present value method is a capital budgeting method to compare any two or more similar…

Q: The time value of money indicates that Select one: O a. the money obtained today is worth less than…

A: An individual prefers to receive money as early as possible in order to earn a return by investing…

Q: What is the Time Value of Money (TVM)? Specifically, how do inflation and compound interest effect…

A: Time value of money states that a sum of money has more value today than the same sum at a future…

Q: How do I find what the net increase or decrease is in cash on a Statement of Cash Flow?

A: Add the net cash flows from all three activities of statement of cash flows (i.e. operating…

Q: What is the effect on cash when current liabilities increase? A. Cash increases by the same…

A: Cash flow from operating activities: The cash flow from operating activities section is the first…

Q: Which of the following are problems in using net present value to appraise an investment? 1. The…

A: In evaluating the various investment proposals, one of the methods used is NPV method. In this…

Q: melgguo How much is the ending cash balance?

A: The Cash Balance at the end of the year : P16,350,000

Q: Which of the following statements is CORRECT? * Time lines cannot be constructed in situations where…

A: Cash flow timeline : The cash flow can be graphically represented in the form of a timeline. The…

Q: Why are the cash flows so difficult to estimate accurately?

A: Statement of cash flows: Statement of cash flow is a financial statement that shows the cash and…

Q: ations a

A: The growth or decrease in the quantity of money a firm, organisation, or individual has is referred…

Q: The difference between the sources (in nows) and uses (out nows) of cash represents the net cash…

A: Answer: Cash flow is nothing but the inflows and outflows of the business income. Cash flow is…

Q: 9. Which of the following statements is CORRECT? Group of answer choices One defect of the IRR…

A: The correct statement is "One defect of the IRR method is that it assumes that the cash flows to be…

Q: Define net operating cash flows. Briefly explain why periodic net operating cash flows may not be a…

A: Definition: Net operating cash flow: The net operating cash flow refers to the total transactions…

Q: Value in use is a) © Discount rate b) © Present value of future cash if flows c) © Uncertainty of…

A: The monetary value of an asset or liability is referred to as its value. The most accurate…

Q: Identify which of the following is not one of the five core principles of money and banking?…

A: The answer of which of the following is not the core principle of money and banking is -

Q: Illustrate the process of computing the equivalent present worth when all cash flows are given in…

A: The process to compute the equivalent present worth are: Identify the interest rate Identify the…

Q: Is it possible to have “record net income” for a quarter and negative cash flows at the same time?…

A: The first thing to be noted is that Net income is reported in statement of profit and loss, where as…

Q: In solving measurement problems involving the use of annuities, which of these four required…

A: Financial accounting: Financial accounting is the process of recording, summarizing, and reporting…

Q: What is the estimated worth today of an amount of cash to be received (or paid) in the future…

A: When the amount to be paid or received in future is discounted to find its worth today, this is…

Q: Which of the following is NOT an acceptable basis on which to measure an expense? A cash outflow. O…

A: Measurement of expenses defines a projection of expenses to be incurred in a time frame or for an…

Question

Which statement characterizes the time value of money concept?
A) The future value of a present dollar is less than one dollar.
B) The present value of a future dollar is less than one dollar.
C) The timing of cash flows is not relevant to decision making.
D) None of the above

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

What is the effect on cash when current liabilities decrease? A. Cash increases by the same amount. B. Cash decreases by the same amount. C. Cash decreases by twice as much. D. Cash does not change.
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
The concept of time value of money is that* Note- I am not satisfy give downvote The cash flows that occur earlier are more valuable than cash flows that occur later The cash flows that occur earlier are less valuable than cash flows that occur later The longer the time cash flows are invested, the more valuable they are in the future The future value of cash flows are always higher than the present value of the cash flows
When undertaling net present value calculations, an assumption is typically made that net cash inflows occur at the end of a given year. In reality, net cash flows usually occur throughout the year. What impact does that assumption of year-end net cash flows have on net present value (NPV) It has no impact on NPV because the total cash flows are the same The NPV will be overstated. The direction and significance of the Impact on NPV cannot be determined The NPV will be understated.
What is the money measurement concept? Which one factor can make it difficult to compare the monetary values of one year with the monetary values of another year?
What are the two drawbacks associated with the payback period a. The time value of money is ignored.It ignores cash flows beyond the payback period b. The time value of money is considered.It ignores cash flows beyond the payback period c. The time value of money is considered.It includes cash flows beyond the payback period d. The time value of money is ignored.It includes cash flows beyond the payback period
The difference between the sources (in nows) and uses (out nows) of cash represents the net cash flow during the reporting period. True or false? How is this information very important?
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.
9. Which of the following statements is CORRECT? Group of answer choices One defect of the IRR method is that it does not take account of the cost of capital. One defect of the IRR method is that it values a dollar received today the same as a dollar that will not be received until sometime in the future. One defect of the IRR method is that it does not take account of the time value of money. One defect of the IRR method is that it does not take account of cash flows over a project's full life. One defect of the IRR method is that it assumes that the cash flows to be received from a project can be reinvested at the IRR itself, and that assumption is often not valid.
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 computing the equivalent present worth of each given cash flow series at period zero, which of the following expressions is incorrect?
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.