Long-term investments include cash that will be used to support current operations. True or False True False
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- An investment is a current commitment of money for a period of time, in order to derive future payments that will compensate for, the time the funds are committed, expected rate of inflation and uncertainty of future flow of funds Select one: True False1. Explain the Net Present Value relating to investment of funds in long term investments briefly.This is a term to describe non-physical assets like stocks and bonds that get their value from future cash flows. Multiple Choice investment financial asset real asset financial markets
- Explain what is meant by the internal rate of return of an investment and discuss its relationship to the NPV of an investment. Explain the problems posed for the use of the IRR when it is necessary (i) to choose between two investments and when (ii) investments are characterised by negative net cash flows at the end of their lives. Discuss and evaluate the use of the payback period as an investment criterion.Speculative Balance refers to holding of cash for future investment opportunities. * O True O FalseWhy is it true that a reinvestment rate is implicitly assumed whenever we find thepresent value of a future cash flow? Would it be possible to find the PV of a FV withoutspecifying an implicit reinvestment rate?
- An investment requires a total return that comprises: O a real rate of return and compensation for inflation. a real rate of return, compensation for inflation, and a risk premium. compensation for inflation and a risk premium. a real rate of return, compensation for inflation, a risk premium, and compensation for time and effort devoted to researching alternative investments. None of the aboveExplain the problems posed for the use of the IRR when it is necessary (i) to choose between two investments and when (ii) investments are characterised by negative net cash flows at the end of their lives.Net present value and the payback period are examples of discounted cash flow methods used in capital investment decisions. Group of answer choices True False
- The average duration of its assets is longer than that of its liabilities. There is a reinvestment risk re-finance risk re-pricing risk basis point riskHow do unequal cash flows affect the future value of an investment?You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. If the discount rate decreases the it would lower the calculated value of the investment. Group of answer choices True False