question archive Which of the following investments would have the HIGHEST present value? Assume that the effective annual rate of interest is the same for each investment
Which of the following investments would have the HIGHEST present value? Assume that the effective annual rate of interest is the same for each investment
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Which of the following investments would have the HIGHEST present value? Assume that the effective annual rate of interest is the same for each investment.
Select one:
a. Investment Y pays $200 at the beginning of every 6-month period for the next 10 years (a total of 20 payments).
b. Investment W pays $400 at the end of every year for the next 10 years (a total of 10 payments).
c. Investment Z pays $400 at the beginning of every year for the next 10 years (a total of 10 payments).
d. Investment X pays $200 at the end of every 6-month period for the next 10 years (a total of 20 payments).
Which of the following is NOT a major category on the cash flow statement?
Select one:
a. Cash flows from selling activities
b. Cash flows from investing activities
c. Cash flows from operating activities
d. Cash flows from financing activities
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Q1 - Answer - C. Investment Z pays $400 at the beginning of every year for the next 10 years (a total of 10 payments).
If the payments are done annually in advance the discount rate in the 1st year will be 1 since it is a advance payment like wise in every year due to Paying in advance Discount rate impact will be Reduces there for NPV will increase. This have been clearly showmen in the Attachment as a calculation for the understanding.
Q2 - Answer - A. Cash flows from selling activities
Cash flow from Selling Activity is a Sub part of the Cash flow from Operating Activities which is a Major Category in the cash flow statement. there for Answer is A
Please see the attached file for the complete solution
