A Customer Makes Two Offers to Settle a Disputed Account

question 30

Multiple Choice

A customer makes two offers to settle a disputed account. He will either pay you $500 today or pay you $650 in three years. Which one of the following is correct if your company earns 10.5% on its surplus funds?

• A) The company should accept the $650 offer as it pays $150 more.
• B) The company should accept the $650 offer as it is worth more today.
• C) The company should accept the $650 offer as it is worth $12.42 more today.
• D) The company should accept the $500 offer as it is worth $18.24 more today.
• E) The company should accept the $500 offer as it is worth $512.42 today.

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Definitions:

Valid Constraints

Restrictions or conditions in a mathematical model or optimization problem that are necessary for the formulation to accurately represent the real-world problem it seeks to solve.

Linear Programming

A mathematical technique used to find the optimal solution within a mathematical model that has linear relationships.

Solution Infeasible

A situation in optimization where no solution meets the constraints imposed on the problem.

Linear Programming

A mathematical method used to achieve the best outcome in a mathematical model whose requirements are represented by linear relationships.