You have determined the profitability of a planned project by finding the present value of all...
You have determined the profitability of a planned project by finding the present value of all the cash flows from that project. Which of the following statements would cause the project to look less appealing in terms of the present value of those cash flows?
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The discount rate decreases. |
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The cash flows are extended over a shorter longer period of time, but the total amount of the cash flows remains the same. |
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The discount rate remains constant. |
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Answers b and c above |
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None of the above. |
Homework Answers
When the discount rate decreases, the present value of cash flow increases, so it becomes more appealing
If the discount rate remains constant it would make it neither less appealing nor more appealing
However, if the cash flows are extended over a longer period of time with the same amount of cash flows, then the present value will come down as the time value of money makes it less appealing
Answer is The cash flows are extended over a longer period of time, but the total amount of the cash flows remains the same.
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You have determined the profitability of a planned project by
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Question 21 (3.33 points) You have estimated the value of a planned project by finding the net present value (NPV) of all the cash flows from that project. Which of the following changes would cause the project to look more appealing (have a greater NPV)? Lower discount rate Higher discount rate Higher initial cash outflow (project cost) Cash flows are extended over a longer period of time but the total amount stays the same
Question 5 1 pts You are analyzing the value of an investment by calculating the present...
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If the discount rate is 9
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Question 21 (3.33 points) You have estimated the value of a planned project by finding the net present value (NPV) of all the cash flows from that project. Which of the following changes would cause the project to look more appealing (have a greater NPV)? Lower discount rate Higher discount rate Higher initial cash outflow (project cost) Cash flows are extended over a longer period of time but the total amount stays the same
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D. Calculate the profitability index. What is the net present value of a project with a cost of $100 000 that generates cash flows of $40000 over the next three years, and the required A. $8670 B. $8670 C. $7890 $5210 51 What is the approximate internal rate of return of a project with a cost of $100000 that generates cash flows of $40 000 over the next three ycars? A. 296 B. 5% C.9% D. 1096
If a project costing $73000 has a profitability index of 1 and the discount rate was 12%, then the present value of the net cash flows was O greater than $73000. undeterminable. $73000. O less than $73000.
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percent what is the net present value of a project with the
following cash flows? Year Cash Flow 0 −$ 55,000 1 21,500 2 24,750
3 29,450
If the discount rate is 9 percent what is the net present value of a project with the following cash flows? Year Cash Flow -$55,000 21,500 24,750 29,450 WN
yes
or no?
Generally, the most difficult part of utilizing the net present value concept is: determining whether the discount rate used is higher or lower than the internal rate of return. determining the initial cash outflow required to start a project. computing the net present value once the discount rate and cash flows are determined estimating the future cash flows given the initial investment in the project.
What is the present value of the cash inflows if a project uses a 12 discount rate. The initial investment will be $12,950 and produce $3,000 in annual cash inflows. The estimated life of the project is ten years. Also, calculate the profitability index.
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