International Financial Management
14th Edition
ISBN: 9780357130698
Author: Madura
Publisher: Cengage
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Logan is conducting an economic evaluation under inflation using the then-current approach. If the inflation rate is j and the real time value of money rate is d, which of the following is the interest rate he should use for discounting the cash flows? a. j b. d c. j + d d. j + d + dj.
The principal of the time value of money is probably the single most important concept in financial management. One of the most frequently encountered applications involves the calculation of a future value.
A. The process for converting present values into future values is called . This process requires knowledge of the values of three of four time-value-of-money variables. Which of the following is not one of these variables?
The inflation rate indicating the change in average prices
The duration of the investment (N)
The interest rate (I) that could be earned by invested funds
The present value (PV) of the amount invested
B. Investments and loans base their interest calculations on one of two possible methods: the interest and the. interest methods. Both methods apply three variables—the amount of principal, the interest rate, and the investment or deposit period—to the amount deposited or invested in order to compute…
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.
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Similar questions
Which of the following statements about the time value of money is true?
a.) A dollar in hand today is worth less than a dollar to be received in the future.
b. ) The value of a dollar invested at a positive interest rate decreases over time.
c.) The further in the future you receive a dollar, the less it is worth today.
d.)The higher the rate of interest, the more likely an investor will elect to consume at present and forgo invest his funds.
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What happens to the present value of some fixed dollar amount to be received in the future as time to the money decrease? Why?
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How do you justify using a “constant dollar” cash flow analysis when inflation over the period covered in your “constant dollar” cash flow analysis is as good as guaranteed
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what are the reason that the value of a dollar tomorrow is not the same as the value of a dollar today?
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How is the market interest rate in the short-term and long-term financial market affected under the Pure Expectations theory when suppliers and users of loanable funds expect that interest rates will decrease the next year?
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In general, what effect would a reduction in risk have on “going-in” cap rates? What would this effect be if it occurred at the same time as an unexpected increase in demand? What would the effect on property values be?
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Which of the following statements describing the elements of intrinsic valuation is most accurate?
A.) When the present value of the cashflows is discounted with the appropriate rate and this present value is positive, then the asset providing these cashflows has a value to the investor.
B.) The risk-free rate is the lowest rate that an investor can earn from short-term investments.
C.) Cashflows may include depreciation expenses and amortization costs.
D.) A simple calculation of present values of expected cashflows of different investments using the risk free rate would be enough to determine which asset is best.
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How can we calculate the present worth of actual dollars?
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Finance
The time value of money refers to:
a) Factors that show future value
b) Factors that show past value
c) Concept that a dollar received today is worth more than a dollar received in the future
d) Concept that a dollar received today is worth less than a dollar received in the future
explain in detail
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Which figure of merit provides an interest rate at which the present value of the future cash flows equals the amount invested?
a) NPV
b) IRR
c) Cap Rate
d) DCF
Please ensure accuracy and explain your choice
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What effect do interest rates have on the calculation of future and present value? How does the length of time affect future and present value? How do these two factors correlate?
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If the yield curve is downward sloping, what would the expectations theory suggest about expected future short-term interest rates?
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