If the Five-Year Discount Factor Is D,what Is the Present

question 25

Multiple Choice

If the five-year discount factor is d,what is the present value of $1 received in five years' time?

• A) 1/(1 + d)⁵
• B) 1/d.
• C) 5d.
• D) d.

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Definitions:

Cost Of Capital

The return rate that a company must earn on an investment to maintain its market value and attract funds.

Cash Flows

The complete sum of financial resources being exchanged within a business, profoundly impacting its immediate financial health.

Component Cost Of Debt

The effective rate that a company pays on its current debt, incorporating both interest rates and other costs associated with borrowing.

Component Cost Of Equity

The rate of return that a company must offer investors to encourage investment in its equity, accounting for risk.