At an Interest Rate of 14%, Approximately How Much Would

question 5

Multiple Choice

At an interest rate of 14%, approximately how much would you need to invest today if you wanted to have $2,000,000 in 10 years? (Ignore income taxes.) Use Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided. (Round your intermediate calculations to 3 decimal places.)

• A) $383,436
• B) $540,000
• C) $740,741
• D) $1,043,200

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Definitions:

Preferred Stock

A type of stock that gives holders preferential treatment over common stockholders regarding dividends and claims on assets in case of liquidation.

Common Stock

Shares of ownership in a corporation, giving holders voting rights and a share in the company's profits via dividends.

Cumulative Preferred

Cumulative preferred stock is a type of preferred stock that has a provision entitling shareholders to accumulate unpaid dividends to be paid out before any dividends can be issued to other stock classes.

Par Common Stock

The face value of common stock as designated in the company's charter, not necessarily its market value.