You Plan to Analyze the Value of a Potential Investment

question 63

Multiple Choice

You plan to analyze 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 decreases.
• B) the cash flows are in the form of a deferred annuity, and they total to $100,000. you learn that the annuity lasts for only 5 rather than 10 years, hence that each payment is for $20,000 rather than for $10,000.
• C) the discount rate increases.
• D) the riskiness of the investment's cash flows decreases.
• E) 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.

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Definitions:

Symptom Substitution

A theory suggesting that if a symptom is removed without resolving the underlying cause, a new symptom will emerge to take its place.

Problem Reduction

Problem reduction is a strategy in problem-solving processes that involves breaking down a larger, often complex problem into smaller, more manageable parts to address them individually.

Joseph Wolpe

A psychiatrist who significantly contributed to the development of behavioral therapy through techniques like systematic desensitization.

Conditioning

The process of learning associations between environmental stimuli and behavioral responses, often used to explain behavior modification.