The concept of time value of money is important to financial decision making because:

a.It emphasizes earning a return on invested capital

b.It recognizes that earning a return makes $1 worth more today than $1 received in the future

c.It can be applied to future cash flows in order to compare different streams of income

d.All of these

Mr. Smith has just invested $10,000 for his son (age 7). The money will be used for his son's education 15 years from now. He calculates that he will need $100,000 for his son's education by the time the boy goes to school. What rate of return will Dr. Stein need to achieve this goal?

a.Between 9% and 10%

b.Between 16% and 17%

c.Between 10% and 11%

d.Between 15% and 16%

Cresol Corporation has a large number of potential investment opportunities that are acceptable. However, Cresol does not have enough investment funds to invest in all of them. Which calculation would be the best one for Cresol to use to determine which projects to choose?

a.Payback period

b.Simple rate of return

c.Net present value

d.Project profitability index