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The discount rate ordinal' used in present value calculations is the
Suggested Answer: B
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If the 8% return exactly equals the present value of the future flows ., NPV is zero), then simply determine the present value of the future inflows. Thus, Hopkins Company's initial cash outlay is $19,090 [($2,500)(PVIFA at 8% for 10 periods) + ($5J00)(PVlF at 8% for 10 periods ($2,500)(6.710) + ($5,000)(.463)].
36 comments · newest first
JE
Jeff
10 months ago
Nope, it's not the Fed rate either!
TH
Therese
10 months ago
Wait, is it really just that? Seems too simple.
NA
Nana
10 months ago
I thought it was the Treasury bill rate.
VA
Vanesa
10 months ago
I agree, C is the right choice!
MA
Margret
11 months ago
It's definitely the minimum desired rate of return set by the firm.
ID
Idella
11 months ago
I’m leaning towards option C, the minimum desired rate of return. It just makes sense in the context of present value, but I could be wrong!
PH
Phil
11 months ago
I feel like the prime rate might be relevant, but it seems more like a general interest rate than a discount rate for present value calculations.
DE
Derrick
11 months ago
I remember practicing a question where the discount rate was linked to the Treasury bill rate. Could that be the right answer here?
VA
Vallie
12 months ago
I think the discount rate is related to the firm's desired return, but I'm not entirely sure if it's the minimum rate.
LE
Leonor
12 months ago
Ah, I remember learning about this in class. The discount rate is the firm's minimum desired rate of return, not the Federal Reserve rate or Prime rate. I'm confident option C is the correct answer.
MA
Margarett
12 months ago
The discount rate is the rate used to calculate the present value of future cash flows, right? I think it's the Treasury bill rate, since that's a common benchmark for risk-free investments. I'll select option B.
JU
Jutta
1 year ago
Hmm, I'm a bit unsure about this one. I know the discount rate is important for present value, but I can't remember if it's the Federal Reserve rate, Treasury bill rate, or something else. I'll have to think this through carefully.
CA
Carmelina
1 year ago
I'm pretty sure the discount rate used in present value calculations is the minimum desired rate of return set by the firm, so I'll go with option C.
TA
Tayna
1 year ago
If the discount rate was the Prime rate, I'd be discounting my future earnings at the same rate as my credit card. Not very realistic, is it?
GE
Geraldo
1 year ago
C) Minimum desired rate of return set by the firm
ET
Ettie
1 year ago
B) Treasury bill rate
OL
Olen
1 year ago
A) Federal Reserve rate
GL
Glory
1 year ago
The Federal Reserve rate? What is this, a trick question? That's the interest rate the Fed uses, not what businesses use for their own investments.
RO
Ronald
1 year ago
B) Treasury bill rate.
LA
Lauran
1 year ago
C) Minimum desired rate of return set by the firm.
JO
Jordan
1 year ago
A) Federal Reserve rate
NY
Nydia
1 year ago
The prime rate? Really? That's for commercial loans, not for discounting future cash flows. C is the way to go.
LE
Lera
1 year ago
The Federal Reserve rate and Treasury bill rate are also not typically used as the discount rate in present value calculations.
DA
Daryl
1 year ago
Yeah, the prime rate is not typically used for discounting future cash flows.
AN
Antonette
1 year ago
I agree, the minimum desired rate of return set by the firm is the discount rate used in present value calculations.
RO
Roslyn
1 year ago
I think the Treasury bill rate is the right answer here. It's a common proxy for the risk-free rate used in present value calculations.
ER
Erick
1 year ago
I'm not sure, but I think the Prime rate could also be a possible answer.
SA
Salome
1 year ago
I believe it's the Federal Reserve rate that is used in present value calculations.
TE
Tequila
1 year ago
I think it might actually be the minimum desired rate of return set by the firm.
BA
Barbra
1 year ago
I agree, the Treasury bill rate is commonly used as the risk-free rate.
KE
Kerry
2 years ago
The discount rate is definitely the minimum desired rate of return set by the firm. That's what we've been learning in our finance classes.
EL
Elliot
1 year ago
Yes, that's correct. It's an important concept in finance.
RO
Roosevelt
1 year ago
I agree, the discount rate is the minimum desired rate of return set by the firm.
ED
Edwin
2 years ago
That makes sense, the firm's desired rate of return would be more relevant for present value calculations.
LA
Lacresha
2 years ago
I disagree, I believe it is the Minimum desired rate of return set by the firm.
ED
Edwin
2 years ago
I think the discount rate ordinal used in present value calculations is the Treasury bill rate.