As the discount rate increases, the present value of a given future cash flow also increases. Do
Question:
As the discount rate increases, the present value of a given future cash flow also increases. Do you agree? Explain.
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...
Step by Step Answer:
No As the discount rate increases the present valu...View the full answer
Managerial Accounting
ISBN: 978-0697789938
13th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
Related Video
The present value of future cash flows is calculated to determine the value today of a stream of future cash flows. It is calculated by discounting the future cash flows to their present value using a discount rate. The discount rate reflects the time value of money and the risk of the cash flows. It is important because it helps in making investment decisions, capital budgeting, loan decision making, and financial planning. By discounting future cash flows to their present value using a discount rate, it takes into account the time value of money and the risk associated with the cash flows. This allows investors, lenders, and financial planners to evaluate the viability of potential investments, projects, or loan applications, and to estimate the future value of investments or savings. calculating the present value of future cash flows is important in making investment decisions, capital budgeting, loan decision making, and financial planning. It helps to determine the viability of long-term projects, evaluate loan applications, and estimate the future value of investments or savings.
Students also viewed these Managerial Accounting questions
-
As the discount rate increases, the present value of the returns falls more rapidly than the present value of the costs. Why?
-
As the discount rate decreases, the present value of a given future cash flow also decreases. Do you agree? Explain.
-
The present value of a given cash flow gets smaller as the number of periods gets larger, regardless of whether cash flow is discounted with a real rate or nominal rate. Explain why this relationship...
-
Assume FCFs are $2 million for two years (FCF1 and FCF2) and FCFs grow 3% thereafter. Assume WACC = 7%. Calculate firms value
-
A researcher wants to estimate the average income of parents of college students. To accomplish that, he surveys a sample of 250 students at Yale. Is this a representative sample? Explain your answer.
-
How is the utilization factor u for cogeneration plants defined? Could u be unity for a cogeneration plant that does not produce any power?
-
All of the following would be considered a company with high operating leverage, except a(n) a. airline company. b. t-shirt kiosk in a mall. c. hotel chain. d. amusement park.
-
The Grilton Tire Company manufactures racing tires for bicycles. Grilton sells tires for $50 each. Grilton is planning for the next year by developing a master budget by quarters. Griltons balance...
-
We have defined a PyTorch network class DAN for you. You need to implement the forward pass for your deep averaging network. To start, first implement average that averages the words in a review and...
-
In this exercise, you modify the Password application from this chapters Apply lesson. Use Windows to make a copy of the Password Solution folder. Rename the copy Password Solution-Advanced. Open the...
-
Explain how the cost of capital serves as a screening tool when using (a) The net present value method and (b) The internal rate of return method.
-
Refer to Exhibit 144. Is the return on this investment proposal exactly 14%, more than 14%, or less than 14%? Explain.
-
Divide 15 + 23i by -3 + 7i. Check the result by multiplication.
-
You stand in your yard and hold a battery-powered buzzer that is emitting a frequency of \(560 \mathrm{~Hz}\) as a friend stands next to you. (a) What frequency does your friend hear if you throw the...
-
Two airplanes simulating a dogfight are headed right for each other, plane A moving at \(285 \mathrm{~km} / \mathrm{h}\) and plane B moving at \(295 \mathrm{~km} / \mathrm{h}\). The electronic...
-
While you are driving on a straight road at \(97 \mathrm{~km} / \mathrm{h}\), a police car traveling in the opposite direction comes toward you with the siren blaring, and the frequency you hear is...
-
A car traveling west at \(90 \mathrm{~km} / \mathrm{h}\) along a road running parallel to a railroad track approaches a train traveling east at \(65 \mathrm{~km} / \mathrm{h}\). If the train's...
-
Two violin strings, each having a linear mass density of \(0.0014 \mathrm{~kg} / \mathrm{m}\) and under the same \(100-\mathrm{N}\) tension, have the same fundamental frequency of \(660...
-
Analyzing and Assessing Research and Development Expenses (LO2) Advanced Micro Devices, Inc. (AMD) and Intel Corp. (INTC) are competitors in the computer processor industry. Following is a table (\$...
-
The tractor is used to lift the 150-kg load B with the 24-mlong rope, boom, and pulley system. If the tractor travels to the right at a constant speed of 4 m/s, determine the tension in the rope when...
-
Determine the product of the addition reaction. CH3 C CH-CH3 + HCN NaCN
-
Why should the timing of direct materials purchases be closely coordinated with the production budget?
-
Why should the timing of direct materials purchases be closely coordinated with the production budget?
-
a. Discuss the purpose of the cash budget. b. If the cash for the first quarter of the fiscal year indicates excess cash at the end of each of the first two months, how might the excess cash be used?
-
Kubin Company's relevant range of production is 20,000 to 23,000 units. When it produces and sells 21,500 units, its average costs per unit are as follows: Average Cost per Unit Direct materials $...
-
Superior Company provided the following data for the year ended December 31 (all raw materials are used in production as direct materials): Selling expenses Purchases of raw materials Direct labor...
-
Write a program call seq-multiplier which will print out numbers in a sequence multiplied by a number input by a user. Your program should store the sequence [52, 1, 34, 23, 18, -9, 21, 4, 79] in a...
Study smarter with the SolutionInn App