Question

1. A dollar received today is worth more than a dollar received tomorrow because of: (select all that apply)

none of the other answers are correct

opportunity cost of time

prices rise over time

inflation

2.

Your analysts tell you that compared to last year, Firm A increased its financial leverage ratio by 60% and Firm C decreased its financial leverage ratio by 11%. Based on this information alone, what can we say about the performance of Firms A and C?

Firm Y is doing better than last year.

None of the other answers are true.

Firm X is doing better than last year.

Firm Y is doing better than Firm X.

3.

Consider the cash flow stream given by x=(30,20,10). If an individual is infinitely patient, how much would they would value this cash flow stream in present dollars? (round to the nearest dollar)

Answer 1

1.

opportunity cost of time; inflation

Theres a opportunity cost of ot spending money, thus its needs to be recovered by charging an interest. The inflation rate is alo a reason money devalues over time.

2. None of the other answers are true.

(please check the options), the answer should be firm C is doing better than previously

3. 20

As the discount rate is nil, it will simply be the avaerage of the 3 values.

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