Calculate, to the Nearest Cent, the Present Value of an Investment

question 137

Multiple Choice

Calculate, to the nearest cent, the present value of an investment that will be worth $4,000 after 9 years, at 10% per year, compounded annually.

• A) \(P V = \$ 3,712.13\)
• B) \(P V = \$ 1,696.39\)
• C) \(P V = \$ 3,619.52\)
• D) \(P V = \$ 4,444.44\)
• E) \(P V = \$ 1,632.35\)

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Definitions:

EBIT

Earnings before interest and taxes, a measure of a firm's profitability that excludes interest and income tax expenses.

Financial Leverage

The use of borrowed funds to increase the potential return on investment, amplifying both potential gains and losses.

Returns to Shareholders

The gains earned by shareholders on their investments in a corporation, typically in the form of dividends and stock price appreciation.