Homework Answers
Ans I and III only
Increase in number of payments and decrease in interest rate will increase the present value of the annuity. The more the number of payment, the more will be the present value of annuity. When interest rate increases, the present value decreases and when interest rate decreases, the present value increases.
| Annuity PV Factor (End of Year) = | P [ 1 - ( 1 + r )-n ] |
| r |
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Question 2 Which of the following will increase the present value of an annuity, all else...
Question 2 (0.2 points) Which of the following will increase the present value of an annuity,...
Question 2 (0.2 points) Which of the following will increase the present value of an annuity, all else held constant? I. Increase in the number of payments II. Decrease in the interest rate III. Increase in the interest rate IV. Decrease in the payment amount 1) I, III, and IV only 2) I, II, and IV only O3) II and IV only 4) I and III only 5) I and II only
Holding other things constant, which of the following will increase the present value of an annuity?...
Holding other things constant, which of the following will increase the present value of an annuity? I. Increase in the number of payments II. Increase in the interest rate III. Decrease in the interest rate IV. Decrease in the payment amount Group of answer choices I, III, and IV only I and II only I and III only I, II, and IV only II and IV only
7. The annual annuity stream of payments with the same present va the project's_ - cost....
7. The annual annuity stream of payments with the same present va the project's_ - cost. a. incremental C. d. opportunity equivalent annual 8. A cost that has already been paid, or the liability to pay has already been in a. salvage value expense. b. sunk cost. C. opportunity cost. Samarbrod or bloze d. erosion cost 9. A bond with semi-annual interest payments, all else equal, would be price with annual interest payments. A. higher B. lower C. the same...
In accordance with the dividend growth model, an increase in the following except will raise the...
In accordance with the dividend growth model, an increase in the following except will raise the current value of a stock. 1. dividend amount II. investor's required return III. dividend growth rate Multiple Choice 0 I and Il only 0 O and Ill only 0 I only 0 Ill and III 0 ll only Which of the following is/are true for the average accounting return method of project analysis? 1. does not need a cutoff rate II. ignores time value...
Find the present value of an annuity immediate such that payments start at 10 and increase...
Find the present value of an annuity immediate such that payments start at 10 and increase by annual amounts of 10 to a payment of 100. Then payments decrease by 20 to a final payment of 40. Assume an effective rate of interest of 4%
2. Which one of the following is the annuity present value factor? a. (1 + Present...
2. Which one of the following is the annuity present value factor? a. (1 + Present value factor) /r b. (1 - Present value factor) /r. c. Present value factor + (1/r) d. (Present value factor X r) + (1/r) e. r * (1 + Present value factor) 3. How does a perpetuity differ from an annuity? a. perpetuity payments vary with the rate of inflation b. perpetuity payments vary with the market rate of interest c. perpetuity payments are...
The dividend growth model: I. cannot be used to value zero-growth stocks. II. cannot be used to compute a stock pri...
The dividend growth model: I. cannot be used to value zero-growth stocks. II. cannot be used to compute a stock price at any point in time. III. requires the required return to be higher than the growth rate. IV. assumes that dividends increase by a constant amount forever. V. none of the above is correct Multiple Choice 0 II, and IV only 0 V only 0 1, I, II, and IV only 0 Ill only 0 In order to estimate...
Each of the following situations is independent. (Future Value of $1, Present Value of $1, Future...
Each of the following situations is independent. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1) (Use appropriate factor(s) from the tables provided.) Case Present Value Annuity Future Value Annual Interest Rate Number of Years A $150,000 ---- (i) 3% 7 B (ii) --- $150,000 4% 6 C (III) $3,000 ---- 2% 10 D ---- $4,000 (IV) 3% 20 Compute the missing amounts for (i) through (iv). (Round your answers to...
13. Choose the Choose the option that correctly ranks the following investments from highest present value...
13. Choose the Choose the option that correctly ranks the following investments from highest present value to lo All options have the same interest rate. ent value to lowest present value. 1. A perpetuity with an annual cash flow of $100. II. An annuity due with 10 annual payments of $100. III. An ordinary annuity with 10 annual payments of $100. A. B. C. D. E. II, I, III I, II, III I, III, 11 III, II, 1
12. Present value of annuities and annuity payments Aa Aa The present value of an annuity...
12. Present value of annuities and annuity payments Aa Aa The present value of an annuity is the sum of the discounted value of all future cash flows. You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities earn the same positive interest rate. O An annuity that pays $500 at the end of every six mońths O An annuity that pays $1,000 at the...
Question 2 (0.2 points) Which of the following will increase the present value of an annuity, all else held constant? I. Increase in the number of payments II. Decrease in the interest rate III. Increase in the interest rate IV. Decrease in the payment amount 1) I, III, and IV only 2) I, II, and IV only O3) II and IV only 4) I and III only 5) I and II only
7. The annual annuity stream of payments with the same present va the project's_ - cost. a. incremental C. d. opportunity equivalent annual 8. A cost that has already been paid, or the liability to pay has already been in a. salvage value expense. b. sunk cost. C. opportunity cost. Samarbrod or bloze d. erosion cost 9. A bond with semi-annual interest payments, all else equal, would be price with annual interest payments. A. higher B. lower C. the same...
In accordance with the dividend growth model, an increase in the following except will raise the current value of a stock. 1. dividend amount II. investor's required return III. dividend growth rate Multiple Choice 0 I and Il only 0 O and Ill only 0 I only 0 Ill and III 0 ll only Which of the following is/are true for the average accounting return method of project analysis? 1. does not need a cutoff rate II. ignores time value...
2. Which one of the following is the annuity present value factor? a. (1 + Present value factor) /r b. (1 - Present value factor) /r. c. Present value factor + (1/r) d. (Present value factor X r) + (1/r) e. r * (1 + Present value factor) 3. How does a perpetuity differ from an annuity? a. perpetuity payments vary with the rate of inflation b. perpetuity payments vary with the market rate of interest c. perpetuity payments are...
The dividend growth model: I. cannot be used to value zero-growth stocks. II. cannot be used to compute a stock price at any point in time. III. requires the required return to be higher than the growth rate. IV. assumes that dividends increase by a constant amount forever. V. none of the above is correct Multiple Choice 0 II, and IV only 0 V only 0 1, I, II, and IV only 0 Ill only 0 In order to estimate...
13. Choose the Choose the option that correctly ranks the following investments from highest present value to lo All options have the same interest rate. ent value to lowest present value. 1. A perpetuity with an annual cash flow of $100. II. An annuity due with 10 annual payments of $100. III. An ordinary annuity with 10 annual payments of $100. A. B. C. D. E. II, I, III I, II, III I, III, 11 III, II, 1
12. Present value of annuities and annuity payments Aa Aa The present value of an annuity is the sum of the discounted value of all future cash flows. You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities earn the same positive interest rate. O An annuity that pays $500 at the end of every six mońths O An annuity that pays $1,000 at the...
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