A) If you have a series of cash flows,each of which is positive,you can solve for I,where the solution value of I causes the PV of the cash flows will be more than the cash flow at Time 0.
B) If you have a series of cash flows,and CF0 is negative but each of the following CFs is positive,you can solve for I,but only if the sum of the undiscounted cash flows exceeds the cost.
C) To solve for I,one must identify the value of I that causes the PV of the positive CFs to equal the absolute value of the FV of the negative CFs.It is impossible to find the value of I without a computer or financial calculator.
D) If you solve for I and get a negative number,then you must have made a mistake.
E) If CF0 is positive and all the other CFs are negative,then you can still solve for I.
G) A) and C)
Correct Answer
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Correct Answer
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A) The cash flows are in the form of a deferred annuity,and they total to $100,000.You learn that the annuity lasts for 10 years rather than 5 years,hence that each payment is for $10,000 rather than for $20,000.
B) The discount rate decreases.
C) The riskiness of the investment's cash flows increases.
D) The total amount of cash flows remains the same,but more of the cash flows are received in the later years and less are received in the earlier years.
E) The discount rate increases.
G) A) and D)
Correct Answer
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Correct Answer
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A) 3.33%
B) 2.60%
C) 2.92%
D) 3.44%
E) 3.62%
G) A) and E)
Correct Answer
verified
Correct Answer
verified
A) The cash flows are in the form of a deferred annuity,and they total to $100,000.You learn that the annuity lasts for only 5 rather than 10 years,hence that each payment is for $20,000 rather than for $10,000.
B) The discount rate increases.
C) The riskiness of the investment's cash flows decreases.
D) The total amount of cash flows remains the same,but more of the cash flows are received in the earlier years and less are received in the later years.
E) The discount rate decreases.
G) B) and D)
Correct Answer
verified
Correct Answer
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