You Plan to Analyze the Value of a Potential Investment

question 13

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 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.
• B) The discount rate increases.
• C) The riskiness of the investment's cash flows decreases.
• D) 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.
• E) The discount rate decreases.

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Definitions:

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The act of going beyond the normal limits or surpassing usual physical human experiences, often associated with spiritual or existential states.

Self-Actualizing Person

An individual who realizes their potentialities and seeks personal growth and fulfillment, as described in Maslow's hierarchy of needs.

Peak Experiences

Highly positive moments of joy and fulfillment that are often a realization of one's true potential or a sense of transcendental unity with the universe.

Democracy

A system of government in which power is vested in the people, who rule either directly or through freely elected representatives.