A Decrease in Demand for Coffee Can Be Caused by

question 25

Multiple Choice

A decrease in demand for coffee can be caused by

• A) an increase in demand for substitute products by younger populations.
• B) a decrease in demand due to changing preferences for healthier products.
• C) an increase in income if coffee is an inferior good.
• D) all of the above.

Understand the impact of salvage value, working capital, and income taxes on the evaluation of investment projects.

Understand the method for computing the simple rate of return and its significance in investment decisions.

Distinguish between different investment evaluation methods, namely the Profitability Index, Internal Rate of Return (IRR), and Net Present Value (NPV), and their applicability in ranking investment projects.

Grasp the concept of present value and how future cash flows are discounted to their present value.

---

Definitions:

Present Value Factors

Mathematical factors used to calculate the present value of a future amount of money or stream of cash flows given a specified rate of return.

Yield 10%

Represents the annual return on an investment, expressed as a percentage of the investment's cost. Here, the investment is expected to return 10% annually.

Bond Interest Expense

The cost that an issuer of bonds incurs over the bond term as interest payments to bondholders, as dictated by the interest rate of the bond.

Floating-rate Debt

A form of borrowing where the interest rate varies over time with market conditions, opposed to fixed-rate debt.