Ques. 1)You have just calculated the present value of the expected cash flows of

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.

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