Quiz on Time Value of Money 1

What does the time value of money concept state?

• A shilling in the future is more valuable than a shilling today.

• Future cash flows are always guaranteed.

• A shilling received today is more valuable than a shilling received in the future.

• Money has the same value regardless of when it is received.

What is an opportunity cost?

• The total expenses incurred in a project.

• The amount of money you can save.

• The gain you have given up by not investing money.

• The cost of borrowing money.

Why do individuals prefer current consumption?

• Future consumption is always uncertain.

• They have more money in the future.

• They generally prefer to enjoy benefits now rather than later.

• They can invest more in the future.

What is one reason for the time value of money?

• Investors prefer to wait for returns.

• Money can only be used for immediate expenses.

• Future cash inflows are always certain.

• Inflation decreases the value of money over time.

What should a business consider when investing in a project?

• The immediate cash flow only.

• The potential future cash flows and their present value.

• The total cost of the project.

• The opinions of all employees.

What does risk and uncertainty refer to in the context of time value of money?

• The unpredictability of future cash inflows.

• The guaranteed returns from investments.

• The ability to predict market trends.

• The fixed costs associated with investments.

What is a key factor for small businesses regarding the time value of money?

• They have unlimited resources.

• They often have limited resources to invest.

• They can always predict future cash flows.

• They do not need to consider time value.

What happens if the benefits received from an investment are greater than the costs?

• The investment should be abandoned.

• The investment is a failure.

• The investment is too risky.

• The investment creates value.

What is the implication of receiving RM1,000 now versus one year from now?

• You will have more money in the future.

• You miss the opportunity to earn interest or returns.

• You will definitely lose money.

• You will have less money in the future.

In capital budgeting decisions, what is crucial to evaluate?

• The upfront investment versus future cash flows.

• The historical performance of the business.

• The opinions of stakeholders.

• The current market trends.