Net Present Value Will Be Greater

question 62

Multiple Choice

Net present value will be greater

• A) as a fixed set of cash receipts occurs later rather than earlier
• B) as the total of the cash receipts, made in same time periods, is smaller
• C) for one end-of-year receipt of $1200 than for twelve monthly receipts of $100 each
• D) for a 4% discount rate than for a 6% discount rate
• E) All of the above are true.

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Definitions:

Disposable Income

The amount of income left for an individual or household after paying all taxes, available for spending, saving, or investing.

Autonomous Consumption

The level of consumption that occurs when income is zero, showing the basic level of consumption necessary for survival.

Permanent Income Hypothesis

A theory suggesting that people's consumption decisions are based on their long-term income expectations rather than their current disposable income.

Negative Savings

A situation where spending exceeds income, resulting in a deficit rather than savings.