Answered: Suppose you know that an investment…

Suppose you know that an investment will earna positive return in the future. Why is it important to know the present value of the investment?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 24Q: How does the size of the initial investment affect the internal rate of return on the net present...

See similar textbooks

Related questions

Q: Why future value is important to calculate?

A: Future value is the value of what a certain asset/cash/instrument will be worth at a future…

Q: what is apr? do we use APR or EAR when we are calculating the present value of investment? is APR…

A: The term APR stands for Annual percentage rate. It reflects the amount of simple interest being owed…

Q: What is a satisfiable investment? When the present value of benefits surpasses the cost of an…

A: This question explains about the present value of benefits surpasses and the cost of an investment…

Q: How do an investment's required rate of return vary with perceived risk? Explain with an example?

A: Required rate of return refers to the rate which the investors expects from their investments. This…

Q: Are there sources of value in an investment? what they are? and give an example for both?

A: Yes, there are various sources of value in an investment. An investment is a stock or a bond. People…

Q: What is a satisfactory investment? When the present value of benefits exceeds the cost of an…

A: Satisfactory investment refers to an investment wherein the present value of benefits after…

Q: What are the benefits and corresponding risks of Financial Investment?

A: Financial Investments are investments that are made with the expectation to receive future financial…

Q: Why is it necessary to determine how long you can expect to reap benefit from the investment?

A: Individuals as well as firms often make investment and specify the time limit for which this…

Q: If the net present value of a proposed investment is positive

A: Net present value method (NPV): Net present value method is the method which is used to compare the…

Q: 11-2 What is the expected return of the following investment? Probability Payoff 0.3 30.0% 0.2 10.0…

A: The expected return is the minimum required rate of return which an investor required from the…

Q: Are the financial projections realistic and healthy?

A: Estimating things before the real cost and revenue incurred is known as financial estimation.…

Q: Which of the following decision criteria is the easiest to use and very popular among investors?…

A: The capital budgeting process uses different methods to analyze the projects. Each method has…

Q: What are investment returns?

A: Investment returns are a performance measure used to evaluate a speculation’s adequacy or to think…

Q: When considering multiple possible investments, why are rates of return preferable than monetary…

A: An investment's net profit or loss over a certain period expressed as a percentage of the…

Q: Describe the affects of the present value of an investment.

A: Present value of the investment: Present value of the investment is calculated using the cash flows…

Q: compare Future Value and Present Value?

A: The comparison between present value and future value is as follows:

Q: Describe the SML in words. What is it saying about how investors form required rates of return?…

A: This question talks about Security Market Line (SML) and its implications on.Security Market Line is…

Q: What are some possible financial decisions in which using the Future Value (FV) formula might be…

A: The concept of time value of money states that the money received today is worth more than that the…

Q: A realized return is the rate of return actually earned on an investment. Group of answer choices…

A: Return: Return is defined as the money attained or lost on an investment through certain time…

Q: Rational investors prefer to receive money today rather than the same amount of money in the future.…

A: The Time Value of Money is an important concept for investors because a dollar on hand today is…

Q: As you increase the length of time involved, what happens to future values? What happens to present…

A: Time value of money refers that money received now has higher worth in comparison with money…

Q: You are analyzing a stock that has a beta of 1.18. The risk-free rate is 4.2% and you estimate the…

A: The beta of the stock is 1.18 The risk-free rate is 4.2% The market risk premium is 7.9% To Find:…

Q: An investor purchased 50 shares of stock in a company for $50 per share. One year later, the…

A: Rate of Return = Total Profit / Purchase cost of shares

Q: Which is more important, saving or investing? Justify your answer

A: First let us know the difference between saving and investing. Saving is the amount of money saved…

Q: What is the difference between future value and present value? Which approach is generally preferred…

A: Present value and future value are considered while taking investment decisions. The future values…

Q: why do we need to quantify the investment risk and returns?

A: Almost all investments possess certain risks and return.

Question

Suppose you know that an investment will earn
a positive return in the future. Why is it important to know the present value of the investment?

Video Video

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction

VIEW

Step 2: Explanation

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

What is a satisfactory investment? When the present value of benefits exceeds the cost of an investment, what can you conclude about the rate of return earned by the investor relative to the discount rate?
Why is it necessary to determine how long you can expect to reap benefit from the investment?
What is a satisfiable investment? When the present value of benefits surpasses the cost of an investment, what conclusion can be drawn about the investor's rate of return in comparison to the discount rate?
How does the size of the initial investment affect the internal rate of return on the net present value models?
why do we need to quantify the investment risk and returns?
How do an investment's required rate of return vary with perceived risk? Explain with an example?
What are some possible financial decisions in which using the Future Value (FV) formula might be helpful?
Are there sources of value in an investment? what they are? and give an example for both?
Describe the affects of the present value of an investment.
Which of the following decision criteria is the easiest to use and very popular among investors? O Payback period. O Internal rate of return. O Average accounting return. Net present value. O Discounted return on investment.
Describe the SML in words. What is it saying about how investors form required rates of return? Thoroughly evaluate the implications of the SML's message.
Are the financial projections realistic and healthy?