You Plan to Analyze the Value of a Potential Investment

question 43

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.

---

Definitions:

Cattell's Approach

A theory in personality psychology that utilizes factor analysis to categorize human personality traits into 16 primary factors.

Biological

Pertains to processes and aspects that are derived from or relate to the physiology and genetic makeup of living organisms.

Underlying Structure

refers to the basic or fundamental organization or framework of a system, concept, or theory that supports its observable characteristics or phenomena.

Cross-Cultural Research

Research that compares cultural contexts to understand the influence of culture on behavior, attitudes, and values.