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WHICH ONE OF THE FOLLOWING STATEMENTS IS CORRECT ALL ELSE HELD CONSTANT tHERE IS AN INVERSE RELATIONSHIIP between the present value and the future value?
The statement is incorrect. There is an inverse relationship between present value (PV) and the discount rate, not between present value and future value (FV). As the PV increases, the FV also increases when the discount rate and time period are held constant. Conversely, a higher discount rate reduces the PV for a given FV.
Does the npv of future cash flows increase or decrease as the discount rate increases?
NPV decreases with increasing discount rates.
How does discount rate affect net present value?
The discount rate directly influences the net present value (NPV) by determining the present value of future cash flows. A higher discount rate reduces the present value of those cash flows, leading to a lower NPV, while a lower discount rate increases the present value and thus the NPV. If the discount rate exceeds the internal rate of return of a project, the NPV may become negative, indicating that the project may not be viable. Conversely, a lower discount rate can make an investment more attractive by increasing its NPV.
What variables are required to calculate the present value of a future amount?
The future amount itself and a discount rate.
How to calculate the present value of a bond?
To calculate the present value of a bond, you need to discount the future cash flows of the bond back to the present using the bond's yield to maturity. This involves determining the future cash flows of the bond (coupon payments and principal repayment) and discounting them using the appropriate discount rate. The present value of the bond is the sum of the present values of all the future cash flows.
What happens to the present value of an annuity if the future value of an annuity is increased?
It increases
To increase a given present value the discount rate should be adjusted?
To increase a given present value, you would generally lower the discount rate. This is because a lower discount rate reduces the impact of future cash flows, making the present value higher. Conversely, increasing the discount rate would decrease the present value.
What is the present value of 132000?
To calculate the present value of $132,000, you need to know the discount rate and the time period for which you're calculating the present value. The formula is ( PV = \frac{FV}{(1 + r)^n} ), where ( FV ) is the future value ($132,000), ( r ) is the discount rate, and ( n ) is the number of periods. Without specific values for ( r ) and ( n ), the present value cannot be determined.
Discount rate in natural resource management?
Discounting means the proceedure by which we find the present value of future benefits. If the discount rate is low then the availability of resources in future is moreIf the discount rate is high then the availability of resources in future is less .ie. faster will be the depletion of natural resources leaving less for future generation
Why present values are dependent upon interest rates?
Interest rates are also known as discount rates because in order to calculate the present value of a future amount, the future amount must be discounted back to the present
What is the net present value of a stock valued at Rs. 54880 after 3 years?
The net present value (NPV) of a stock is calculated by discounting its future value back to the present using a specific discount rate. To find the NPV of a stock valued at Rs. 54,880 after 3 years, you would need to know the discount rate. Without that information, the NPV cannot be accurately determined. If you provide a discount rate, I can help you calculate the NPV.
Why is the present value of any future amount greater when the discount rate is lower?
The present value of a future amount is greater when the discount rate is lower because a lower discount rate reduces the impact of time on the value of money. Essentially, a lower rate means that the future cash flows are discounted less steeply, leading to a higher present value. This reflects the principle that money has the potential to earn returns over time; thus, a lower rate indicates a lower opportunity cost of waiting to receive that future amount.
