Furious Fred Expects Cash Flows from an Investment as Follows

question 4

Multiple Choice

Furious Fred expects cash flows from an investment as follows:
Yr 1 $3,000,Yr 2 $5,000,Yr 3 $8,000
Using an opportunity cost of capital of 5.6%,the present value is:

• A)$14,118
• B)$14,523
• C)$14,361
• D)$14,909
• E)none of the above

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Definitions:

Operating Leverage

A measure of how sensitive a company's operating income is to changes in sales volume, indicating the degree of fixed versus variable costs.

Percentage Change

A mathematical calculation that depicts the degree of change over time, usually expressed as a percentage.

Break-Even

The point at which total costs and total revenue are equal, meaning there is no net loss or gain, and one has "broken even."

Monthly

Pertaining to or calculated for a period of one month.