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
Q: Which of the following characteristics is a necessary feature for pricing a set of cash flows as an…
A: An ordinary annuity is a payment with the same amount and same time interval. Features of the…
Q: When considering the discount rate to use for discounting cash flows of an entire company, we can…
A: The discount rate is the loan cost used to decide the current worth of future incomes in a…
Q: of the Disadvantages of the method Discounted payback period is Ignores the time value of money…
A: Step 1 The discounted payback period (DPB) is the time it takes for a project's original cost to…
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
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: Which of the following statements is correct? The NPV method assumes that cash flows will be…
A: Solution:- Net Present Value (NPV) means the net of the present value of cash inflows and initial…
Q: One problem with free cash flow method is gives too much weight to countinung value. Do you agree
A: Answer :- YES
Q: The discounted payback method is better than the regular payback method because The time value of…
A: Payback period is the amount of time required to recover initial investment. Regular payback period…
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…
Q: A financial analyst is treating a cash flow stream as a perpetuity. The present value of the…
A: Present Value of Perpetuity: It represents the present worth of the perpetual cash flow stream. It…
Q: 10
A: Cash flow refers to the total amount of cash and its equivalents that travel in and out of a company…
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.
Q: Which of the following statements are true regarding the payback period of an investment? It does…
A: Answer: The correct option is (4) All of the above.
Q: echnical problems associated with the internal rate of return include:
A: IRR (Internal Rate of Return): It is the rate of return that makes the net present value of the…
Q: Why is it true that a reinvestment rate is implicitly assumed whenever we find thepresent value of a…
A: Discounting is the method of assessing the real value of a potential transaction or collection of…
Q: One of the shortcoming of the payback method is that it ignores cash flows after the payback period.…
A: Payback method has serious disadvantages like it Ignores the time value of money.
Q: Which of the following items describes a weakness of the internal rate-of-return method?a. The…
A: IRR (Internal Rate of Return):
Q: Describe the essential differences between the following cash flow streams: Annuity versus…
A: The difference in the cash flows will arise due to the change in the time period which is associated…
Q: If current liabilities increase, what is the effect on cash? What about a decrease in current…
A: Liabilities: The claims creditors have over assets or resources of a company are referred to as…
Q: Everything else equal, the annual compounding will always give the highest future value whether…
A: Effective interest rate is the interest rate after considering the effect of compounding and more is…
Q: The only time you change the original cash flow diagram in problems involving uniform series cash…
A: Cash flow diagrams are defined as business tools that are used to represent the cash flows that is…
Q: The concept that supports the discounting of notes to their present value is: time value of money…
A: The process of assessing the present value of a payment( Lump-sum) or a stream of…
Q: Why are accruals called spontaneous sources of funds, what are their costs, and why don’tfirms use…
A: Spontaneous source of funds means source through which funds can be arises from daily business…
Q: Why can closed-end funds sell at prices that differ from net asset value while open-end funds do…
A: An open-ended fund is the investment vehicle in which assets are pooled from diversified investors…
Q: Can someone give an example or scenario of deferred annuity?
A: Under deferred annuity, the investment is made with the insurance company and any taxes to be paid…
Q: What is the process of solving a cash flow for an unknown interest rate?
A: Time Value of Money: According to the concept of TVM, the company always interested to know the PV…
Q: To find the present value of an uneven series of cash flows, you must find the PVs of the individual…
A: The present value is the value of a series of cash flows in the current time period computed on the…
Q: All of the following are weaknesses of the payback period EXCEPT Select one: a. only an implicit…
A: Payback period is period required to recover initial investment in the project.
Q: why annuity due have larger value than ordinary annuity? with exampl
A: Annuity Due: Annuity due relates to a set of equal payments made at the identical interval at the…
Q: To find NPV, it requires
A: NPV or net present value technique is used to determine the present value of all future cash flows.…
Q: Achieving profitability will automatically assure sufficient amounts of cash. True or false?
A: Profitability is the ability of the company to earn a profit. Profit is an amount of revenue over…
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: Explain the problems posed for the use of the IRR when it is necessary (i) to choose between two…
A: IRR or Internal rate of return is the annualized rate of return for an project with expected cash…
Q: How would an increase in the interest rate or a decrease in the number of periods until the payment…
A: Interest rate is defined as an amount of an interest due per period as the proportion of amount,…
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: What is the traditional cash equivalency approach used to determine how below-market-rate loans…
A: Introduction: The given question is related to the concept of real estate finance and investments.…
Q: Which statement characterizes the time value of money concept? A) The future value of a present…
A: Present value means worth of a dollar today Future value worth of a dollar in future.
Q: Payback is considered an unsophisticated capital budgeting technique because it a) gives explicit…
A: Capital budgeting is the method through which corporations make decisions of the acceptance and…
Q: Give an example for Ordinary Present Value of Annuity from your own understanding.
A: Let, Annual Amount to be paid for 10 years are $10,000. Interest rate charged @ 10% Here Annual…
Q: “The greater the discount rate, the greater the present value of a future cash flow.” True or false?…
A: Present Value: The value of today's amount expected to be paid or received in the future at a…
Q: What is meant by an incremental cash flow? What do you need to ask yourself when deciding whether a…
A: When a firm takes on a new project, there is new cash flow associated with this new project. The…
Q: Which of following statements is CORRECT? The MIRR and NPV decision criteria can never conflict One…
A: MIRR : MIRR is one of the capital budgeting techniques, which helps the business organization to…
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: 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…
Q: When a capital investment is expected to provide unequal annual cash inflows, the payback period…
A: Payback period: It can be defined as the time that investment takes before it starts generating…
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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.