You Are Trying to Use Your Financial Calculator to Solve

question 299

Multiple Choice

You are trying to use your financial calculator to solve a present value problem that has unequal cash flows. You input monies you receive as positive values. Which one of the following statements is true?

• A) Cash outflows should be input as positive values for each year in which they occur.
• B) Any cash flow occurring today should be input as a Year 1 cash flow.
• C) You have annual cash flows starting with Year 1 of $100, $0, $200, and $300. The $300 cash flow should be input as occurring in year 3.
• D) Because you are solving for the present value, any cash flow that occurs today can be ignored.
• E) A negative present value indicates that this series of cash flows causes you to lose money today given a certain discount rate.

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Definitions:

Fixed Cost

Expenses that do not vary with the level of production or sales, such as rent or salaries.

Variable Cost

Costs that vary directly with the level of production or with volume of output.

Inelastic Demand

A market situation where the demand for a product does not significantly change with a change in its price.

Elastic Demand

A situation in which the demand for a product is sensitive to price changes, meaning that a small change in price results in a large change in the quantity demanded.