You Plan to Analyze the Value of a Potential Investment

question 16

Multiple Choice

You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows.Which of the following would increase the calculated value of the investment?

• A) The cash flows are in the form of a deferred annuity,and they total to $100,000.You learn that the annuity lasts for 10 years rather than 5 years,hence that each payment is for $10,000 rather than for $20,000.
• B) The discount rate decreases.
• C) The riskiness of the investment's cash flows increases.
• D) The total amount of cash flows remains the same,but more of the cash flows are received in the later years and less are received in the earlier years.
• E) The discount rate increases.

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Definitions:

Social Identities

The part of an individual's self-concept derived from their perceived membership in social groups.

Outgroup Homogeneity

The perception that members of an out-group are more similar to each other than they actually are, especially when compared to the perceived diversity within an in-group.

Gender

Variations in traits that distinguish between male and female qualities.

Unpredictable

Not able to be predicted or foreseen, indicating randomness or lack of a discernible pattern in behavior or events.