To value a bond you must take the future value of all future cash flows by...
To value a bond you must take the future value of all future cash flows by using the NPV formula. true or false
Homework Answers
FALSE
To value a bond you need to present value of future cash flows. Future cash flows of a bond are coupons and face value. Coupons are discounted using present value of annuity formula. Face value is discounted to a present value.
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To value a bond you must take the future value of all future
cash flows by...
The value of the bond is simply the PV of all of the expected future cash...
The value of the bond is simply the PV of all of the expected future cash flows. In other words, the value of the bond is the PV of the coupon payments plus the present value of the par, or face, value. What are some red flags that would prompt you to think twice before investing in a bond?
True or false: Value of a bond is not the Present Value of the Cash Flows
True or false: Value of a bond is not the Present Value of the Cash Flows
A. The excess of the present value of future cash flows over the initial investment outlay...
A. The excess of the present value of future cash flows over the initial investment outlay for a project is the: 1. Internal rate of return (IRR) of the project 2. Modified internal rate of return (MIRR) on the project 3. Book (accounting) rate of return for the project 4. Net present value (NPV) of the project 5. Modified internal rate of return (MIRR) of the project B. Items that have cash flow effects during the operating phase of an...
If the process of coming back to present value (PV) from future cash flows is called...
If the process of coming back to present value (PV) from future cash flows is called discounting, then the process of going to future value (FV) from present value (PV) is called compounding. (TRUE/FALSE)?_______________________ For a corporate bond, the quoted interest rate minus the real risk-free rate is equal to which of the following? Nominal interest rate Real inflation rate plus nominal interest rate Market risk premium The sum of inflation premium, default risk premium, liquidity premium and maturity risk premium
Question 3 To find the future value of a stream of cash flows you just calculate...
Question 3 To find the future value of a stream of cash flows you just calculate the future value of each flow and then add them. True Question 7 A decline in the interest rate decreases the present value of those payments and the price of bonds. Trun
Choose the best answer for the following: Given a set of even future cash flows, you...
Choose the best answer for the following: Given a set of even future cash flows, you can Select one: a. Use a financial calculator to calculate their NPV using the CFj, I/YR and NPV keys. b. Use a financial calculator to calculate their PV without using the NPV, CFj and NPV keys. c. Use a financial calculator to calculate their FV d. All of the above. e. a and c only
An impairment loss must be recognized when... A) The present value of the asset's future cash flows is higher than the a...
An impairment loss must be recognized when... A) The present value of the asset's future cash flows is higher than the asset's fair value B) The present value of the asset's future cash flows is lower than the asset's fair value C) An asset's book value is lower than its fair value D) An asset's book value is higher than its fair value
Suppose you are evaluating a project with the expected future cash inflows shown in the following...
Suppose you are evaluating a project with the expected future cash inflows shown in the following table. Your boss has asked you to calculate the project's net present value (NPV). You don't know the project's initial cost, but you do know the project's regular, or conventional, payback period is 2.50 years. If the project's ~WACC~ is 7%, the project's NPV (rounded to the nearest dollar) is: Year Cash Flo Year 1 $300,000 Year 2 $450,000 Year 3 $450,000 Year 4...
QUESTION 1 The future value of a going concern is often measured by a discounted cash...
QUESTION 1 The future value of a going concern is often measured by a discounted cash flow model. True False QUESTION 2 Replacement value insurance helps insure against the impact of inflation. True False QUESTION 3 One valuation technique should be used universally and consistently for all valuation decisions. True False QUESTION 4 Greed was a significant factor in the financial crisis that began in 2008. True False QUESTION 5 Mismatching cash flows and discount rates when attempting to value...
The stock price is equal to the present value of all future cash flows from the...
The stock price is equal to the present value of all future cash flows from the stock discounted at ________________________. In other words, what do we call the rate at which we discount the future dividends?
Question 3 To find the future value of a stream of cash flows you just calculate the future value of each flow and then add them. True Question 7 A decline in the interest rate decreases the present value of those payments and the price of bonds. Trun
Suppose you are evaluating a project with the expected future cash inflows shown in the following table. Your boss has asked you to calculate the project's net present value (NPV). You don't know the project's initial cost, but you do know the project's regular, or conventional, payback period is 2.50 years. If the project's ~WACC~ is 7%, the project's NPV (rounded to the nearest dollar) is: Year Cash Flo Year 1 $300,000 Year 2 $450,000 Year 3 $450,000 Year 4...
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