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Finance - Present Value, IRR and Payback

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I have 4 questions: The book I'm using is very bleak.

1. If the present value of a given su, is equal to its future value, then
a. the discount rate must be very high
b. there is no inflation
c. the discount rate must be zero
d. none of the above are correct

2. Which of the following would increase the future value of a single sum?

a. an increase in the opportunity cost of funds
b. an increase in the single sum
c. an increase in the time delay until receipt of the future value
d. a and b
e. all of the above

3. If the U.S. has higher inflation than Germany, then the German mark will be trading at:
a, a discount in the forward market
b. a premium in the forward market
c. German prices are rising at a faster rate than U.s. prices
d. a and c
e. b and c

4. IRR does not include the following in its analysis:
a. the time value of money
b. all of the project's cash flows
c. an absolute measure of the change in shareholders wealth
d. all clearly defined, objective decision criteria
e. all of the above

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Solution provided by:
Gaurav Agarwal, MS
Education
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
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