Which of the Following Sequence of Events Follows a Rise

question 242

Multiple Choice

Which of the following sequence of events follows a rise in the discount rate?

• A) r↓ ⇒ I↓ ⇒ AE↓ ⇒ Y↑
• B) r↑ ⇒ I↓ ⇒ AE↓ ⇒ Y↓
• C) r↓ ⇒ I↑ ⇒ AE↑ ⇒ Y↑
• D) r↑ ⇒ I↑ ⇒ AE↑ ⇒ Y↑

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Definitions:

Working Capital

The variance between an organization's existing resources and immediate liabilities, demonstrating the financial liquidity to support day-to-day operations.

Straight-Line Depreciation

An operation for spreading the cost of a physical asset throughout its effective life in regular yearly installments.

Initial Investments

The upfront capital invested in a project or company, which may include the purchase of equipment, buildings, or starting funds for operations.

After-Tax Discount Rate

The rate used to discount future cash flows to their present value, adjusted for taxes.