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1. ) Which of the following changes would result in the highest present value for a series of
cash flows?
A A $100 decrease in taxes each year for four years
B A $100 decrease in the cash outflow each year for three years
C A $100 increase in disposal value at the end of four years
D A $100 increase in cash inflow each year for three years2.)Which of the following events would decrease the internal rate of return of a potential
investment?
A Decreased tax-allowable depreciation available on the investment
B Decreased working capital requirements
C Decreased cost of capital
D Using reducing balance, instead of straight-line depreciationanswer is a for both questions . can u plz explain y it is? thanky you sir
1. An annuity of $100 a year will always have a higher PV than a single flow.
An annuity for 4 years is always going to be better than an annuity for 3 years of the same amount.2. C & D have no effect at all on the IRR. B means higher net flows and therefore a higher IRR. A will mean lower net flows and therefore a lower IRR.
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