Photo from MR. A b) How might they be mathematically related whenapplied to interest - type investments where yourmoney is invested at the beginning of the year? FV == Present ValuePV × (1 + i) n where; Future Value (FV)(PV) + the accumulated and compounded Interest, "i"is the interest rate and n is the number of years ofinvestment. (c) How might they be mathematicallyrelated when applied to mining - type investmentswhere your investment consists of amounts spentthroughout the year and you only receive money backfrom the mine's eventual product sales? Provide someexplanation for the difference

b) Interest-Type Investments: In the case of interest-type investments, you're often dealing with a…

Answered: b) How might they be mathematically…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 13MC: Which of the following discounts future cash flows to their present value at the expected rate of...

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Which of the following affects the present value of an investment? a. The type of investment (annuity versus single lump sum) b. The number of time periods (length of the investment) c. The interest rate d. All of the above
A. Assume that the variables I, N, and PV represent the interest rate, investment or deposit period, and present value of the amount deposited or invested, respectively. Which equation best represents the calculation of a future value (FV) using: Compound interest? FV = (1 + I)NN / PV FV = PV / (1 + I)NN FV = PV x (1 + I)NN B. Simple interest? FV = PV + (PV x I x N) FV = PV - (PV x I x N) FV = PV / (PV x I x N) C. Identify whether the following statements about the simple and compound interest methods are true or false. Statement True False After the end of the second year and all other factors remaining equal, a future value based on compound interest will never exceed the future value based on simple interest. All other variables held constant, investments paying simple interest have to pay significantly higher interest rates to earn the same amount of interest as an account earning compound…
Which of the following affects the present value of an investment? The type of investment (annuity versus single lump sum) The number of time periods (length of the investment) The interest rate All of the above
if you were to invest your money which term will you use to compute for the interest in your investment: exact or approximate time?
Assume that the variables I, N, and PV represent the interest rate, investment or deposit period, and present value of the amount deposited or invested, respectively. Which equation best represents the calculation of a future value (FV) using: Compound interest? O FV = PV / (1+1)N O FV = PV + (PV XIX N) O FV = PV x (1 + I)N Simple interest? OFV = PV + (PV XIX N) O FV = PV XIX N O FV = PV/(PV XIX N)
The discount rate used in a net present value analysis is the ________. A. rate of interest earned on a savings account B. rate of inflation C. rate of interest charged for debt financing of an investment D. required rate of return or the hurdle rate
The factor ( 1 + i ) n in the formula is known as the future-value factor (FVF) or _____________ factor of a single amount. Select one: a. compound-interest b. capital-interest c. original-investment d. variable-interest.
Why are rates of return superior to dollar returns when comparingdifferent potential investments?
(b) Explain the relationship between net present value and internal rate of return, and show how they may offer complementary methods for evaluating investments.
Which of the following discounts future cash flows to their present value at the expected rate of return, and compares that to the Initial Investment? A. internal rate of return (IRR) method B. net present value (N PV) C. discounted cash flow model D. future value method
A primary strength of the net present value method for analyzing investments is that it accounts for the amount and timing of earnings for that investment. A. True B. False
What does the Excel argument Nper refer to? Number of periods of time for a loan or investment. The constant periodic payment required to pay off a loan or investment. Periodic interest rate. Present value of an investment.

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