You Plan to Analyze the Value of a Potential Investment

question 112

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 increase the calculated value of the investment?

• A) The discount rate increases.
• 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 10 years rather than 5 years, hence that each payment is for $10, 000 rather than for $20, 000.
• C) The discount rate decreases.
• D) The riskiness of the investment's cash flows increases.
• E) The total amount of cash flows remains the same, but more of the cash flows are received in the later years and less are received in the earlier years.

---

Definitions:

Rods

Photoreceptor cells in the retina responsible for vision at low light levels, but not for color vision.

Fovea

A small depression in the retina of the eye where visual acuity is highest due to the concentration of cone cells.

Peripheral Vision

The ability to see objects and movement outside of the direct line of vision, which is essential for activities such as driving.

Color-Blind

The inability or decreased ability to see color or distinguish between colors, due to genetic or acquired conditions affecting color perception.