Tomʹs Donuts Can Invest in a New Espresso Machine That

question 158

Multiple Choice

Tomʹs Donuts can invest in a new espresso machine that costs $500 and will yield expected profits of $350 each year for two years. What is the present discounted value of the expected profits from this investment if the interest rate is 4%?

• A) $323.59
• B) $480.77
• C) $660.13
• D) $673.08

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Definitions:

Debit Cards

Plastic cards issued by banks that allow cardholders to transfer money electronically from their bank account when making a purchase.

Grace Period

A set period of time after the due date during which payment can be made without penalty.

M2

A money aggregate consisting of M1 plus savings deposits, small-denomination time deposits, money market mutual funds, and other miscellaneous near-monies.

Near-Monies

Assets that are easily convertible into cash but are not cash themselves, such as savings accounts and time deposits.