363) Suppose the discount rate is 10% per year. Which of the following statements is true?

Answer is:

The present value of Rs.1,331 in three years’ time is Rs.1,000

The future returns are the extra revenue the firm will get from owning the machine.

The net present value of the machine is Rs.500

The firm might not buy the machine now simply because of the risk involved

If the firm does not buy the machine now, but redoes the calculations in three months, it might find the net present value has increased

Answer is:

If prices rise at a rate faster than the nominal interest rate, then real interest is negative

If the risk-free interest rate rises, the projects whose net present values are most affected are those with short lives

The internal rate of return on a project is the discount rate which would make its net present value zero

The internal rate of return on a project is a percentage measure of its expected returns

Answer is:

If the expected price next year exceeds the extraction cost by any amount

If the expected price next year exceeds the extraction cost but by less than 5%

If the expected price next year exceeds the extraction cost but by exactly 5%

If the expected price next year exceeds the extraction cost but by more than 5%

Answer is:

They expect the price next year, minus the extraction cost, to equal the figure for this year

They expect the price next year, minus the extraction cost, to exceed the figure for this year by less than 5%

They expect the price next year, minus the extraction cost, to exceed the figure for this year by exactly 5%

They expect the price next year, minus the extraction cost, to exceed the figure for this year by more than 5%

Answer is: