Which of the Following Statements Is CORRECT

question 131

Multiple Choice

Which of the following statements is CORRECT?

• A) some of the cash flows shown on a time line can be in the form of annuity payments, but none can be uneven amounts.
• B) a time line is not meaningful unless all cash flows occur annually.
• C) time lines are useful for visualizing complex problems prior to doing actual calculations.
• D) time lines cannot be constructed in situations where some of the cash flows occur annually but others occur quarterly.
• E) time lines cannot be constructed for annuities where the payments occur at the beginning of the periods.

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Definitions:

Profitability Index

A financial tool used to measure the relative profitability of an investment, calculated as the present value of future cash flows divided by the initial investment cost.

Working Capital Investment

The funds invested in the short-term assets of a company, such as inventory and receivables, to support its daily operations.

Salvage Value

The estimated residual value of an asset at the end of its useful life, important for calculating depreciation.

Discount Rate

The interest rate used in discounted cash flow analysis to determine the present value of future cash flows or to evaluate the attractiveness of an investment.