You have just won the university lottery. If you graduate, you will receive a refund equal to the amount of tuition you paid in your first four years of school
However, you need money now and a firm that specializes in buying expected future cash flows has offered to discount the lottery winnings at a rate of 8% and pay you cash today in exchange for your future lottery winnings. Since you have studied finance, you insist that they discount the cash flows at 12% instead of 8% because there is some risk as to the certainty of your graduating. If the firm agrees to your demand, then this means they will increase the present value of what they will pay you today.
Indicate whether the statement is true or false.
Answer: FALSE
Explanation: An increase in the discount rate will decrease the present value of what the firm will pay you today.
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To assist users of financial reports in making over-time comparisons, both U.S. GAAP and IFRS require firms to include results for multiple reporting periods in each report
Indicate whether the statement is true or false
A grocery chain is interested in exploring the impact effective supply chain management would have
Suppose that for every $1 of sales, 4% is profit, 50% is spent in the supply chain, and the remaining 46% is evenly divided between fixed and production costs. If the chain can save $1 in the supply chain it would take how many dollars of increased sales to have the same increase in profit? Assume that fixed costs are fixed so that the portion of increased sales allocated to fixed costs is instead profit (27% profit margin combined now).
A contingency was evaluated at year-end and considered to have a reasonable possibility of becoming an actual liability. If this was not reported in the notes to the financial statements, what is the effect on the financial reporting of the company?
A) There would be no effect. B) The liabilities on the balance sheet would be understated. C) The information about the transaction would be inadequately disclosed in the notes. D) The net income of the company would be understated.
An interest rate is also called a discount rate.
Answer the following statement true (T) or false (F)