Which of the Following Statements Is Correct

question 75

Multiple Choice

Which of the following statements is correct?

• A)If you have a series of cash flows, all of which are positive, you can solve for I, where the solution value of I causes the PV of the cash flows to equal the cash flow at Time 0.
• B)To solve for I, one must identify the value of I that causes the PV of the positive CFs to equal the absolute value of the PV of the negative CFs. This is, essentially, a trial-and-error procedure that is easy with a computer or financial calculator but quite difficult otherwise.
• C)If you solve for I and get a negative number, then you must have made a mistake.
• D)If CF₀ is positive and all the other CFs are negative, then you cannot solve for I.

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Definitions:

Accounts Receivable

Outstanding payments from customers to a firm for received goods or services that remain unpaid.

Financial Plan

A comprehensive evaluation of an individual's current pay and future financial state by using current known variables to predict future income, asset values, and withdrawal plans.

Shareholder Wealth

The total value of an individual's ownership stake in a publicly traded corporation, often measured in terms of stock price appreciation plus dividends received.

Sustainable Growth Rate

The highest speed at which a firm can increase its revenue, profits, and dividends without raising its financial borrowing.