You plan to analyze the value of a potential investment by
calculating the sum of the...
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Finance
You plan to analyze the value of a potential investment bycalculating the sum of the present values of its expected cashflows. Which of the following would lower the calculated value ofthe investment?
a. The total amount of cash flowsremains the same, but more of the cash flows are received in theearlier years and less are received in the later years.
b. The riskiness of theinvestment's cash flows decreases.
c. The discount rateincreases.
d. The cash flows are in the formof a deferred annuity, and they total to $100,000. You learn thatthe annuity lasts for only 5 rather than 10 years, hence that eachpayment is for $20,000 rather than for $10,000.
e. The discount ratedecreases.
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