You Are Analyzing the Value of a Potential Investment by Calculating

question 4

Multiple Choice

You are analyzing the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following would lower the calculated value of the investment?

• A) The discount rate increases.
• B) The riskiness of the investment's cash flows decreases.
• C) The total amount of cash flows remains the same, but more of the cash flows are received in the earlier years and less are received in the later years.
• D) The discount rate decreases.