Consider the Following Time Line: If the Current Market

question 31

Multiple Choice

Consider the following time line: If the current market rate of interest is 8%,then the present value of the cash flows on this timeline is closest to:

• A)$1000.
• B)$857.
• C)$860.
• D)$926.

---

Definitions:

Incremental Borrowing Rate

The interest rate a company would have to pay if it borrows funds, used as a benchmark in lease agreements to calculate the present value of minimum lease payments.

Balance Sheet

A financial statement that shows a company's assets, liabilities, and shareholders' equity at a specific point in time.

Liability

Financial obligations or debts owed by a business to others, which must be settled over time through the transfer of economic benefits.

Cash Flows

The inflows and outflows of cash and cash equivalents, reflecting the operational, investing, and financing activities of a business.