Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Question
Chapter 10, Problem 7PS
Summary Introduction
To discuss: The reason for not considering a larger discount rate as a cure for the cash-flow
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Why is it true, in general, that a failure to adjust expected cash flows forexpected inflation biases the calculated NPV downward?
Forecasting risk can be defined as the possibility that _____ will lead to incorrect decisions.
a. the inclusion of opportunity costs
b. erosion
c. errors in projected cash flows
d. the exclusion of sunk costs
e. net working capital costs
Why is budgeting assumptions not always accurate and others focuses on one area only like finance?
Chapter 10 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 10 - Capital budgeting process True or false? a. The...Ch. 10 - Prob. 2PSCh. 10 - Prob. 3PSCh. 10 - Project analysis True or false? a. Sensitivity...Ch. 10 - Prob. 5PSCh. 10 - Real options True or false? a. Decision trees can...Ch. 10 - Prob. 7PSCh. 10 - Prob. 9PSCh. 10 - Prob. 10PSCh. 10 - Break-even analysis Break-even calculations are...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- When 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 lowarrow_forwardHow will a decrease in time preferences affect the loanable funds market? A. There will be an increase in the supply of loanable funds. B. There will be a decrease in the supply of loanable funds. C. There will be an increase in the demand of loanable funds. D. There will be a decrease in the demand of loanable funds.arrow_forwardThe pricing efficiency of financial markets can be expected to decrease if the cost of skillful financial analysis increases. True Falsearrow_forward
- Assuming that we are not able to accurately predict cash flows , generally decreased risk is thought to A. Increase interest rates B. Increase present value C. Decrease present value D. Increases cash flowsarrow_forwardAccording to the Liquidity Preferences Model, these are the expected first impact (short run) coming from an increase of Money Supply, EXCEPT:arrow_forwardBased 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.arrow_forward
- Risk means, in today's language, the probability of something bad happening or an unfortunate outcome. Risk in finance, however, is defined as the variance of the probability distribution of returns. a.) Why do these definitions seem contradictory? b.) Reconcile the two ideas.arrow_forwardWhich 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.arrow_forwardWhich of the following is true according to the pure expectations theory? Forward rates:a. Exclusively represent expected future short rates.b. Are biased estimates of market expectations.c. Always overestimate future short rates.arrow_forward
- Rate-based statistics (such as payback and discounted payback) represent summary cash flows, and these summaries tend to lose which two important details? O The investment size and the cash outflows that occur before the testing period O The investment size and the cash inflows that occur during the testing period O The investment size and the cash inflows that occur before the testing period O The investment size and cash inflows that occur after the rather arbitrary testing periodarrow_forwardAn increase in money supply coupled with a disruption in the supply chain will often cause inflation True Falsearrow_forwardAn abnormal return occurs: Only when the actual return is lower than the expected return. Only when the actual return is higher than the expected return. Only when the market value is higher than the intrinsic value. Only when capital appreciation exceeds the expected capital appreciation. Should not be discussed because the word “abnormal” might be hurtful to someone.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Capital Budgeting Introduction & Calculations Step-by-Step -PV, FV, NPV, IRR, Payback, Simple R of R; Author: Accounting Step by Step;https://www.youtube.com/watch?v=hyBw-NnAkHY;License: Standard Youtube License