Question

1. Which of the following statements is incorrect?

a. The time value of money implies that a dollar received today is worth more than a dollar received tomorrow.

b. The time value of money implies that the further in the future you receive a dollar, the more it is worth today.

c. All the answers are correct except one.

d. A dollar today is worth more than a dollar received in the future.

e. The earnings from compounding drive much of the return earned on a long-term investment because the longer the investment period, the greater the proportion of total earnings from interest earned on interest.

2. Which of the following statements is incorrect?

a. The mix of debt and equity on the balance sheet is known as a firm's capital budgeting.

b. Financial managers should invest in a capital project only if such investments increase the value of the firm and thus increase stockholders' wealth.

c. The government is a stakeholder which wants the firm to pay taxes.

d. The owners of a corporation are its stockholders.

e. All the answers are correct except one.

3. Which of the following statements is correct?

a. All the answers are correct.

b. The present value of future cash flows are computed by multiplying future value with the discounting factor.

c. If the cash flow payments, equally spaced and level, over a finite number of periods, the contract is called a perpetuity.

d. The present value of a growing annuity is computed as the cash flow occurring at the end of the first period divided by the difference between the interest or discount rate and the growth rate.

e. The present value of an annuity due is less than the present value of an ordinary annuity.

Answer #1

Answer 1)

Correct Answer The time value of money implies that the further in the future you receive a dollar, the more it is worth today. as this statement is wrong. the present Value will be less the more we move in future.

Option b is correct.

Answer 2)

The mix of debt and equity on the balance sheet is known as a firm's capital budgeting. this statement is wrong as it is caleld capital Structure.

Option a is correct.

Answer 3)

The present value of future cash flows are computed by multiplying future value with the discounting factor. This statement is correct. all other statements are incorrect.

Option b is correct.

1. Which of the following statements is incorrect?
a. Compounding increases the growth of the total interest
earned.
b. Compound interest consists of both simple interest and
interest on interest.
c. All the answers are correct except one.
d. Compounding is the process by which interest earned on an
investment is reinvested so that in future periods, there is
interest on interest as well as the original principal.
e. The term (1 + i) is the present value interest factor,...

1. Which of the following statements is correct?
a. A project with conventional cash flows is one with an initial
cash outflow followed by one or more cash inflows.
b. The NPV method determines how much the future value of cash
inflows exceeds the present value of costs.
c. All the answers are correct.
d. When two projects are independent, accepting one project
implicitly eliminates the other.
e. Conventional cash flow patterns could lead to conflicting
decisions by NPV and...

Which one of the following statements is correct?
a. The future value of an annuity increases when the interest rate
decreases.
b. The present value of an annuity increases when the interest rate
increases.
c. The present value of an annuity is unaffected by the number of
the annuity payments.
d. The future value of an annuity is unaffected by the amount of
each annuity payment.
e, The present value of an annuity increases when the interest rate
decreases.

What is the time value of money?
a. The monetary value of a project’s future net cash flows at
time zero.
b.Funds received today are worth less than the same amount
received in the future because of depreciation.
c.monetary value of accountants’ time spent on a project.
d.Funds received today are worth more than the same amount
received in the future because those funds could be invested today
and earn interest in the interim.

Which of the following statements are correct? Assume APR=5%,
compounded yearly. Select all that apply.
A dollar received today is worth less than a dollar to be
received after a year, assuming zero inflation.
A dollar received today is worth more than a dollar to be
received after a year, assuming zero inflation.
If the yearly inflation rate is also 5%, the value of the dollar
will not change after a year.
None of the above.

Which of the following statements is NOT
CORRECT?
a.
The IRR method takes into account the time value of money
b.
The IRR method values a dollar received today greater than a
dollar that will be received until sometime in the future
c.
The IRR method takes into account the cash flows over a
project’s full life
d.
The IRR method assumes that the cash flows to be received from a
project are to be reinvested at the WACC

Which of the following statements is MOST true?
A. The higher the required rate of return on future cash flows,
the higher the price that someone is willing to pay for those cash
flows.
B. The formula for present value of an annuity due can only be
used when the first cash flow is occurring at time 0.
C. The general formula for future value of an ordinary annuity
is equal to the general formula for present value of an...

Time Value of Money
has shown you that ____________ and you must invest _______.
a. Adollar today is
worth more than a dollar tomorrow; tomorrow
b. A dollar today is worth more than a dollar today; today
c. A dollar does not have time value; anytime in the future
d. Time Value of Money is irrelevant; whenever

Which of the following is not true?
A.) Compound interest will be higher than simple interest
assuming that there will be more than one period of investment.
B.) The Present Value refers to how much cash inflows that will
be received in future will be worth as of today.
C.) Generally, as t (that is, the number of time period)
increases, the Future Value will decrease assuming the r (the rate
in which the interest will compound) is greater than...

Answer the following questions: What happens to the future value
of some fixed dollar amount invested today as the interest rate
decreases? Why? What happens to the present value of some fixed
dollar amount to be received in the future as the interest rate
increases? Why? What happens to the present value of some fixed
dollar amount to be received in the future as the time to receive
the money decreases? Why? Which will have a higher present value,
assuming...

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