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Present value calculations allow managers to:

A) choose assets which create the most value, even if their cash flows are timed differently
B) choose the least expensive forms of financing.
C) create value for the firm.
D) A and C
E) A, B, and C

1 Answer

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Final answer:

Present value calculations enable managers to choose assets that create maximum value and make decisions that create value for the firm, but are not directly associated with choosing forms of financing.

Step-by-step explanation:

Present value calculations are crucial in helping managers make informed decisions regarding investments and understanding the time value of money. Option A) choosing assets which create the most value is correct because different assets generate cash flows at different times, and present value allows for these to be compared on the same terms. Option C) creating value for the firm is also correct because by selecting projects with a higher present value than their current cost, managers can create surplus value for the company.

However, option B) choosing the least expensive forms of financing is not directly related to present value calculations, as these calculations are more aligned with evaluating investment opportunities rather than financing decisions. Therefore, the correct answer would be D) A and C because present value calculations are instrumental in asset selection and value creation but not directly associated with choosing forms of financing.

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