1. When the interest rate goes up, the present value of a future cash flow:

A.Increases

B.Decreases

C.Stays the same

D.In order to know if present value went up or down we need to know how far in the future the cash flow is

2. Which of the following should not be taken into account when calculating present value of future payments?

A.The amounts of cash paid or received

B.The current gross profit margin of the company

C.The timing of the cash flows

D.Whether the cash flows are single sums (lump-sum) or annuities

3. Your companys required rate of return is 7% and using that rate to calculate the NPV of a project you found that the NPV is $2,000 (positive). Therefore, the IRR of the project should be:

A.Higher than 7%

B.Between 5% and 7%

C.Lower than 5%

4. A project requires an initial investment of $490,000, and creates an annual cash inflow of $70,000 for the next 10 years. The Payback period is:

A.10 years

B.5 years

C.1.8 years

D.7 years

5. Which are the two methods for capital budgeting that do take into account the time value of money?

A.IRR and SRR

B.NPV and IRR

C.SRR and payback period

D.Payback period and IRR

Please answer all questions above. Thank you.