Consider the Following Timeline: If the Current Market Rate

question 9

Multiple Choice

Consider the following timeline: If the current market rate of interest is 9%,then the present value of the cash flows on this timeline as of year 0 is closest to:

• A)$492.
• B)$637.
• C)$600.
• D)$400.

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Definitions:

Opportunity Cost

The value of the best alternative foregone as a result of choosing a different option.

Idle Capacity

Unused or underutilized resources and capabilities within an operation that could be employed to generate output.

Tactical Decisions

Short-term choices made by an organization to address immediate challenges or opportunities, often within the framework of broader strategic plans.

Strategic Decisions

High-level choices that are made by top management to steer an organization towards its long-term goals and objectives.