Which of the Following Will Have the Largest Dollar Effect

question 63

Multiple Choice

Which of the following will have the largest dollar effect on the net present value of a 10 year investment project?

• A)a decrease of $20,000 in the initial investment required with no effect on the expected salvage value in 10 years.
• B)an increase of $20,000 in the expected salvage value in 10 years with no effect on the initial investment.
• C)a decrease of $20,000 in both the working capital needed to start the project and the amount being released at the end of the 10 years.
• D)an increase of $2,000 in the annual cash inflows from this project.

Analyze different mortgage options to determine the most cost-effective choice.

Understand the concept of interest compounding and its impact on mortgage payments and amortization.

Determine the principal amount paid off at a certain point in a mortgage payment schedule.

Calculate interest paid over a specific period within the mortgage term.

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Definitions:

Payment Interval

The standard interval at which payments are made on a loan or investment, like monthly or yearly.

Ordinary General Annuity

Recurrent equal value exchanges at the cessation of sequential periods over an established timeline.

Future Value

The projected value of an investment at a specific point in the future, considering factors like interest rates and compound interest.

RRSP

Registered Retirement Savings Plan, a retirement savings plan for individuals in Canada that is tax-deferred until withdrawal.