True or false When the net present value is negative, the present value index will be greater than 1?
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True or false
When the
Net present value:
It is the technique used for analyzing investment in long term capital projects. It is calculated as the difference between the present value of cash inflow and cash outflows.
If NPV is positive accept the project.
If NPV is negative reject the project.
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Solved in 2 steps
- 1._____________ is the rate at which the net present value becomes zero. a. None of the options b. Accounting rate of return c. Adjusted rate of return d. Internal rate of returnInternal Rate of Return is the discount rate that sets NPV to 0. True or false?Which one of the following statements is correct?a. If NPV is positive, IRR will be less than required rate of returnb. If NPV = 0, IRR is equal to the required rate of returnc. If NPV is positive, IRR is equal to the required rate of returnd. If NPV is negative, IRR will be greater than the required rate of returne. None of the above
- Consider the formula: A = P(1 + r)t. What can we say about the variable A? it is a future value it is a present valueThe break-even value calculation is similar to the calculation we use for theinternal rate of return. True or false?A risk-free asset by definition has a beta of zero. OA. True OB. False
- The present value of a future sum increases as the term (N) increases, regardless of compounding frequency. True FalseTrue or False. Please Justify.The discount function [a(t)]^−1 is generally a decreasing function of time.4) Assume the index model is valid, what inputs will be required to determine covariance between two assets? A) βk B) βL C) σM D) all of the options E) None of the options are correct. Choose the correct answer with justification
- Which of the following is not a variable in the basic present value equation? Multiple Choice Number of payments. Future value. Discount rate. Present value. Time horizon.Think about whether a risk-free asset should earn a risk-premium beyond the risk-free rate. Thinking about that should give you an idea of the beta for a risk-free asset. Or, look again at the CAPM equation: E(Ri)=Rf+βi[E(RM)−Rf] Given this equation, what beta sets the E(R) of the risk free asset equal to the risk-free rate? A) zero B) 0.5 C) 1.0 D) its randomWhat is the difference between YTD and YoY return? Provide an example