Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

10. Time Value of Money

Time Value of Money Equations

Financial Accounting

10. Time Value of Money

Time Value of Money Equations

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Multiple Choice

At what discount rate would you be indifferent between accepting a project and rejecting it?

At the rate where the project's internal rate of return (IRR) is negative

At the rate where the project's net present value (NPV) equals zero

At the rate where the project's payback period equals its useful life

At the rate where the project's future value equals its initial investment

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Verified step by step guidance

Understand the concept of Net Present Value (NPV): NPV is the difference between the present value of cash inflows and the present value of cash outflows over a period of time. A project is typically accepted if its NPV is positive, as it indicates profitability.

Understand the concept of Internal Rate of Return (IRR): IRR is the discount rate at which the NPV of a project equals zero. It represents the break-even rate of return for the project.

Identify the condition for indifference: A decision-maker would be indifferent between accepting and rejecting a project when the NPV equals zero. This is because, at this point, the project neither adds nor subtracts value.

Relate the discount rate to the NPV: The discount rate at which the NPV equals zero is the project's IRR. This is the critical rate where the project's cash inflows, discounted at this rate, exactly equal the initial investment.

Conclude the correct answer: The discount rate at which you would be indifferent between accepting and rejecting a project is the rate where the NPV equals zero, which is also the IRR of the project.