Discounted cash flow valuation is the process of discounting an investment's

The payback period is the length of time it takes an investment to generate sufficient cash flows to enable the project to:

The net present value profile illustrates how the net present value of an investment is affected by _________________:*

1 point

Your answer

4. The net present value of an investment represents the difference between the investment's ___________________ and ______________:*

2 points

Your answer

5. Travis is buying a car and will finance it with a loan which requires monthly payments of $265 for the next 4 years. His car payments can be described by which one of the following terms?*

1 point

a. perpetuity

b. annuity

c. consol

d. lumpsum

e. factor

6. Janis just won a scholarship that will pay her $500 a month, starting today, and continuing for the next 48 months. Which one of the following terms best describes these scholarship payments?*

1 point

a. ordinary annuity

b. annuity due

c. consol

d. ordinary perpetuity

e. perpetuity due

7. The Jones Brothers recently established a trust fund that will provide annual scholarships of $12,000 indefinitely. These annual scholarships can best be described by which one of the following terms?*

1 point

a. ordinary annuity

b. annuity due

c. amortized payment

d. perpetuity

e. continuation

8. Required rate of return is used for discounting when calculating net present value when firm relies on_______________.*

1 point

Your answer

9. A firm's cost of capital is calculated using ___________.*

1 point

Your answer

10. What is the net present value of a project with the following cash flows if the discount rate is 14 percent? Would you accept it or not?*

4 points

Your answer

11. A project has the following cash flows. What is the payback period?*

2 points

Your answer

12. What is the net present value of a project that has an initial cost of $40,000 and produces cash inflows of $8,000 a year for 11 years if the discount rate is 15 percent?*

2 points

Your answer

13. First National Bank charges 10.1% compounded monthly on its business loans. First United Bank charges 10.3% compounded semiannually. As a potential borrower, which bank would you go to for a new loan and why?*

2 points

Your answer

14. Ricky's Pawn Shop charges an interest rate of 13.7% per month on loans to its customers. Like all lenders, Ricky must report an APR to consumers. What rate should the shop report? What is the effective annual rate?