Exam 16: Using Present Value to Make Multi-Period Managerial Decisions

All of the following will lead to a smaller discount factor except which one?

A make- or- buy decision examines whether a manager should incur - period costs in order to produce _______in the ________ period(s).

Depreciation allowance _________ the profit subject to taxation, which_______ the amount of tax the firm pays.

Super Haulers is a hauling company and delivers large and heavy materials to construction job sites. Super Haulers is considering purchasing a new dump truck that costs $200,000 and the managers of Super Haulers have estimated that the new dump truck will generate $50,000 a year in future operating profit for the next four years. At the end of four years, Super Haulers can sell the dump truck at a salvage price of $26,000. If the discount rate is 6 percent, what is the net present value of the dump truck?

When costs occur in the future, the_______the costs occurs, the _ _______it is discounted and the negative effect it has on the net present value.

When profits occur in the future, the the profit occurs, the it is discounted and the positive effect it has on the net present value.

All else equal, if a firm needs a small quantity of an input, it is likely to be cost saving for the firm to make the input.

Production of a small quantity of an input is often _______as firms typically _______able to enjoy economies of scale.

The above table shows the future operating profits from an investment. The future operating profits are earned at the end of e the respective years. -Refer to the table above. If the discount rate is 4 percent and the cost of the investment is $40,000, what is the net present value of the investment?

What is the present value of four payments of $5,000 at the end of each of the next four years if the interest rate is 2 percent?

Interest earned on funds compounds because in future years, interest is earned on _______.

Health Bars is considering a two- year advertising campaign. The campaign will cost $60,000 at the end of each of the two years. The managers of Health Bars have estimated that the campaign will generate $42,000 a year in additional profit for the next three years. If the discount rate is 4 percent, what is the net present value of the advertising campaign?

If the present value of an individual's savings account is $52,354, what is its future value in 3 years if the account earns an annual interest rate of 8 percent?

If the salvage value is positive the net present value of an investment_______ and this_______ the likelihood that managers will undertake the project.

Economists consider economic depreciation to be the_______ in market value from the use of the capital and measure this use in terms of _______cost.

The annuity factor_______ by the amount of the annual payment equals the _______value of payments for the specified number of years at the specified discount rate.

Financing an investment with debt _______the net present value of the investment because interest payments_______ tax deductible and the full amount of the principal is due in .

If the net present value is positive, the present value of the investment's stream of future operating profits is ________ than the present value of its cost and profit- maximizing managers_______ make the investment.

The above table shows a 5 year payment plan. Each payment is made at the end of the year, so after one year, a payment of $ made, after two years another payment of $1,500 is made and so on. The interest rate is 3 percent. -Refer to the table above. What is the value of A plus B plus C (A + B +C)or the present value of the first three payments?

The greater the interest rate, the_______ _ the present value and the _________ the discount factor.