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.