1) Using the NPV as a decision rule for investment purposes takes into account the following considerations:
A. Changing benefit streams.
B. Changing levels of risk.
C. Time value of money
D. All of the above.
2) Which of the following would have the largest present value? $5,000 discounted at 12.5% with ________ discounting.
A. annual.
B. quarterly.
C. monthly.
D. weekly.
3) The difference between the NPV and PV stems from
A. a difference in discount rate.
B. the fact that the NPV includes the Terminal Value.
C. the fact that the IRR is the discount rate that sets NPV = 0.
D. the fact that the NPV includes the Initial Investment.
4) Assume that your required rate of return is 12 percent and you are given the following stream of cash flows:
Year Cash Flow
0 $10,000
1 $15,000
2 $15,000
3 $15,000
4 $15,000
5 $20,000
If payments are made at the end of each period, what is the present value of the cash flow stream?
A. $66,909
B. $57,323
C. $61,815
D. $52,345
5) The present value (t = 0) of the following cash flow stream is $5,979.04 when discounted at 12 percent annually. What is the value of the missing (t = 2) cash flow?
0 1 2 3 4 Periods
|--------|--------|--------|---------|
0 1,000 ? 2,000 2,000
A. $2,000
B. $2,391
C. $3,000
D. $3,391