Question

Which of the following affect the interest rate used to discount future cash flows? a. The...

Which of the following affect the interest rate used to discount future cash flows?
a. The degree of impatience or time preference on the part of surplus units
b. The returns that deficit units can earn on investment projects
c. The interaction of a and b
d. All of the above

0 0
Add a comment Improve this question Transcribed image text
Answer #1

c: The interaction of a and b

The interest rate is determined by the degree of impatience of surplus units. The personal degree of impatience is instrumental in deriving the discount rate. It also depends upon the returns that units can earn on other projects which represents the opportunity cost.

Add a comment
Know the answer?
Add Answer to:
Which of the following affect the interest rate used to discount future cash flows? a. The...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • 1. The efficient markets hypothesis implies that a. Above-market returns cannot be expected by an investor...

    1. The efficient markets hypothesis implies that a. Above-market returns cannot be expected by an investor b. Stock prices follow a random walk c. Regular intramonthly patterns in stock prices cannot persist d. All of the above 2. Which of the following affect the interest rate used to discount future cash flows? a. The degree of impatience or time preference on the part of surplus units b. The returns that deficit units can earn on investment projects c. The interaction...

  • D | Question 2 1 pts In the "Ramsey Rule" for deriving a social discount rate, the parameter 8 (i.e. the pure r...

    D | Question 2 1 pts In the "Ramsey Rule" for deriving a social discount rate, the parameter 8 (i.e. the pure rate of time preference) reflects our innate preference for the present over the future. Where does this preference come from? O Our sense of morbidity O Our sense of impatience. O Our sense of mortality e All of the above. D | Question 2 1 pts In the "Ramsey Rule" for deriving a social discount rate, the parameter...

  • Flows Wells, Inc., has identified an investment project with the following cash flows. If the discount...

    Flows Wells, Inc., has identified an investment project with the following cash flows. If the discount rate is 8 percent, what is the future value of these cash flows in Year 4? What is the future value at an interest rate of 11 percent? At 24 percent? Year Cash Flow: 1 $865 2 1,040 3 1,290 4 1,385 3. Future Value and Multiple Cash Flows Wells, Inc., has identified an investment project with the following cash flows. If the discount...

  • 6. If IRR and NPV give different answers, you should to discount future cash a. use...

    6. If IRR and NPV give different answers, you should to discount future cash a. use IRR always b. use NPV always c. Use IRR if mutually exclusive projects d. use IRR if independent projects 7. If you are expressing all cash flows in future dollars, you use the The Innominal restro a. The IRR interest rate b. The nominal interest rate c. The real interest rate d. The corrected interest rate multiple assumptions to see how it affects NPV...

  • 2. Future Co. has identified an investment project with the following cash flows. If the discount...

    2. Future Co. has identified an investment project with the following cash flows. If the discount rate is 13 percent, what is the present value of cash flows? If the initial cost of $3500 will be required, should you accept this project? YEAR CASH FLOW $ 585 815 1630 1500 800 1

  • The CFO of Johnson Industries is calculating the discount rate for the future cash flows of...

    The CFO of Johnson Industries is calculating the discount rate for the future cash flows of a project. The CFO would like to make a calculation of NPV for the project. If the firm has a cost of debt capital of 6% and a cost of equity capital of 10%, which of the following is most likely about the weighted average cost of capital (WACC) for the firm? A) The WACC is 6% B) The WACC is between 6% and...

  • 2. Cannon Inc. has identified an investment project with the following cash flows. If the discount...

    2. Cannon Inc. has identified an investment project with the following cash flows. If the discount rate is 8%, what is the future value of these cash flows in year 4? if the discount rate is 11%, what is the future value in year 4? Show your work. Year Cash Flow 1 $1,225 2 $1,345 3 $1,460 4 $1,590 Page 12 - Q + Cannon Inc. has identified an investment project with the following cash flows. If the discount rate...

  • Present and Future Values of Single Cash Flows for Different Interest Rates Use both the TVM...

    Present and Future Values of Single Cash Flows for Different Interest Rates Use both the TVM equations and a financial calculator to find the following values. Round your answers to the nearest cent. (Hint: Using a financial calculator, you can enter the known values and then press the appropriate key to find the unknown variable. Then, without clearing the TVM register, you can "override" the variable that changes by simply entering a new value for it and then pressing the...

  • Present and Future Values of Single Cash Flows for Different Interest Rates Use both the TVM...

    Present and Future Values of Single Cash Flows for Different Interest Rates Use both the TVM equations and a financial calculator to find the following values. Round your answers to the nearest cent. (Hint: Using a financial calculator, you can enter the known values and then press the appropriate key to find the unknown variable. Then, without clearing the TVM register, you can "override" the variable that changes by simply entering a new value for it and then pressing the...

  • Present and Future Values of Single Cash Flows for Different Interest Rates Use both the TVM...

    Present and Future Values of Single Cash Flows for Different Interest Rates Use both the TVM equations and a financial calculator to find the following values. Round your answers to the nearest cent. (Hint: Using a financial calculator, you can enter the known values and then press the appropriate key to find the unknown variable. Then, without clearing the TVM register, you can "override" the variable that changes by simply entering a new value for it and then pressing the...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT