HRM732 Quiz 9

In evaluating an investment opportunity, a company must know how much cash it receives from or pays for an investment and the timing of the cash flows because receipts and payments that occur in the future are worth more than those that occur earlier. T or F.

False

Riskier investments demand lower rates of return. T or F

False

In which of the following situations will an annuity table be useful?

1. Calculating the net present value of an investment with equal cash flows for the first nine years, but a different flow in year 10 2.Calculating the net present value of an investment with an equal cash flow in years one through four, and a different equal cash flow in years 5 through 10

Your required rate of return is greater than zero. How much is a payment of $3,000 to be received a year from today worth?

Less than $3,000 today

Which of the following is not considered a capital budgeting project?

Purchase of inventory to be sold in the future

Managers may be discouraged from using present value techniques for evaluating investments because of the way in which their own performance is evaluated. T or F

True

Soft benefits are those that often have a significant nonfinancial impact on an investment decision and as such, should be included in the decision analysis. T or F

True

The process of determining present value removes the cost of interest from future cash flows to determine the value of the amount today. T or F

True

Present value techniques

are a way of converting future dollars into their equivalent current dollars.

The basic concept involved in time value of money calculations is that

it is better to receive a dollar today than to receive a dollar in the future.