Question: How would (a) an increase in the discount rate or (b) a decrease in the time period until the cash flow is received affect the

How would (a) an increase in the discount rate or (b) a decrease in the time period until the cash flow is received affect the present value? Why?

Step by Step Solution

★★★★★

3.45 Rating (161 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock

An increase in the discount rate will decrease the present value factor and hence ... View full answer

blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Document Format (1 attachment)

Word file Icon

453-B-A-T-V-M (1765).docx

120 KBs Word File

Students Have Also Explored These Related Accounting Questions!

Q:

How can a change in the discount rate affect commercial loan rates?

Q:

How can an increase in the government budget deficit lead to a change in the trade deficit?

Q:

How will an increase in the price of one of the goods purchased by a consumer affect the location of the budget line?

Q:

a) Find how much would you be willing to pay (rounded to the nearest $) for a 25-year annuity due if the payments are $5,500 per year and you want to earn a rate of return equal to 6.5% per year. b)...

Q:

Using a relevant diagram, describe how would the present value be affected by i) an increase in the discount rate and ii) a decrease in the time period until the cash flow is received.

Q:

Using a relevant diagram, describe how would the present value be affected by i) an increase in the discount rate and ii) a decrease in the time period until the cash flow is received. (7 marks)

Q:

Please process at your earliest convenience. I have enclosed the attached document and other required documents. Thank you for your help! Consider how Kyler Valley Spring Park Lodge could use capital...

Q:

Please look at the attachment. It is all written in there.The question is whether to keep the existing machine or to replace it with the new one. This answer has to be supported by calculations of...

Q:

Issues related to the discount rate: How (conceptually)is the discount rate for capital budgeting purposes defined and calculated? Is this number appropriate foranalyzing the asset-replacement...

Q:

pleas help in this case study.. any body who have done this already and willing to share their case study. thanks ISSN 1940-204X XYZ Company: An Integrated Capital Budgeting Instructional Case David...

Q:

A company permits its decentralized units to lease space to one another. Uptown Division has leased some of its idle warehouse space to Downtown Division for $60 per square foot per month. Recently,...

Q:

(a) Calcium oxide is prepared industrially from what calcium compound? Write the chemical equation for the reaction. (b) Write the equation for the preparation of calcium hydroxide.

Q:

How can investors effectively diversify their portfolios by combining growth and income stocks?

Q:

Much of the economic news we read about can be reinterpreted into our "My = PY" framework. Turn each of the following news headlines into a precise statement about M, v, P, or Y: a. "Deposits in U.S....

Q:

What sales growth rate must Excelsior Inc. achieve if it is to have a cashsurplus? 2012 Income Statement ($Million) Net sales Less: Cost of goods sold Less: Depreciation Earnings before interest and...

Q:

Use the definition of the leverage ratio in the DuPont system to determine if Finns Fridges has become more or less leveraged between year 1 and year 2. Finns Fridges is a company created by twin...

Q:

One key part of ROE in the DuPont system is the return on assets (ROA). Find the ROA for Finns Fridges for both years and determine if it is increasing or decreasing. Finns Fridges is a company...

Q:

http://people.stern.nyu.edu/gsimon/statdata/B01.1305/xls/ 7) (9pts) Download any dataset from the following link: http://people.stern.nyu.edu/gsimon/statdata/B01.1305/xIs/ Open it and save it as a...

Q:

Harrimon Industries bonds have 6 years left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 9%. What is the yield to maturity at a current market...

Q:

Liala created a portfolio with $96,000 invested equally in 3 securities security A has a return of 8%, security B has a return of -0.5 and security C has a return of 10%. find the return for this...