You Have Just Calculated the Present Value of the Expected

question 159

Multiple Choice

You have just calculated the present value of the expected cash flows of a potential investment. Management thinks your figures are too low. Which of the following actions would increase the present value of your cash flows?

• A)Assume a longer stream of cash flows of the same amount
• B)Increase the discount rate
• C)Decrease the discount rate
• D)a and c

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Definitions:

CPI

Measuring the average price for a set basket of goods and services consumed by people, from food to healthcare and transportation, the Consumer Price Index employs their weighted average prices for assessment.

Price Level

The average of current prices across the entire spectrum of goods and services produced in the economy, often measured by inflation indicators.

Prosperity Phase

A period of economic growth and expansion, marked by high levels of production, employment, and consumer confidence.

Business Cycle

The fluctuation in economic activity that an economy experiences over a period of time.