Ques. 1)You have just calculated the present value of the expected cash flows of
ID: 2665007 • Letter: Q
Question
Ques. 1)You have just calculated the present value of the expected cash flows of a potential investment. Management thinks your figures are too low. Which of the following actions would increase the present value of your cash flows?
a. assume a longer stream of cash flows of the same amount
b. decrease the discount rate
c. increase the discount rate
d. a and b
Ques. 2)
Kevin purchased a stock a year ago that pays a dividend. He has earned a 50%. The stock was purchased for $16 and is now worth $21. What is the amount of dividends received during the year?
Explanation / Answer
B) decrease the discount rate (since you divide by the discount rate to get present value) (21-16) +x /16= .5 x=3 $3 worth of dividends.