Multiple choice

1.  The present value of $100 expected in two years from today at a discount rate of 6% is:  

a. $116.64 

b. $108.00 

c. $100.00 

d. $89.00 

2.  Present Value is defined as:  

a. Future cash flows discounted to the present at an appropriate discount rate 

b. Inverse of future cash flows 

c. Present cash flow compounded into the future 

d. None of the above 

3.  If the interest rate is 12%, what is the 2- year discount factor?  

a. 0.7972 

b. 0.8929 

c. 1.2544 

d. None of the above 

4. The managers of a firm can maximize stockholder wealth by:  

a. Taking all projects with positive NPVs 

b. Taking all projects with NPVs greater than the cost of investment 

c. Taking all projects with NPVs greater than present value of cash flow 

d. All of the above