Question

Comparing current returns with future returns, without accounting for the time value of money, will overstate the relative value of the future returns.

True

False

The present value of an ordinary annuity is:

The amount that would be paid today in order to receive a series of unequal payments in the future

The amount that would be paid today in order to receive a series of equal payments in the future

The amount that would be paid in the future in order to receive a series of unequal payments leading up to that point

The amount that would be paid in the future in order to receive a series of equal payments leading up to that point

None of the above

Which of the following affect the weighted average cost of capital?

Interest on bank loans

Dividends expected by investors

Expected increases in the value of stock in the company

Bond interest payments

None of the above

All of the above

Because of the time value of money, a company would prefer to receive a payment due to them:

As early as possible

As late as possible

It does not make a difference when the payment is received

It depends on the discount rate

None of the above

All of the above

Answer 1

Answer : false

Current Return is more valuable than future period as it forgone opportunity cost comparison with future period lead without considering time value of money will result in over statement of future Return

2) The present value of ordinary annuity answer is

The amount that would be paid today in order to receive series equal payments in future

3) effect the weighted average cost of capital

Dividend expected by investors will effect WACC

4) because of the time value of money the business receive payment

As early as possible

Because of it forgoes present opportunity and risk of future inflation and other factors