Sharon Smith Will Receive $1,000,000 in 50 Years

question 76

Multiple Choice

Sharon Smith will receive $1,000,000 in 50 years. The discount rate is 14%. As an alternative she can receive $2,000 today. Which should she choose?

• A) the $1,000,000 in 50 years.
• B) the $2,000 today.
• C) she should be indifferent.
• D) it depends on the inflation rate.

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Definitions:

Production Increases

A rise in the amount of goods and services produced over a given period of time by a business or economy.

High-low Method

A technique used in accounting and finance to estimate the variable and fixed components of a company's costs based on the highest and lowest levels of activity.

Total Fixed Costs

The sum of all expenses that remain constant regardless of the level of production or business activity.

Productive Month

A period in which there is a high level of output or work accomplishment, often measured in terms of productivity metrics in a business context.