Suppose You Will Receive $500 at Some Point in the Future.If

question 27

Multiple Choice

Suppose you will receive $500 at some point in the future.If the annual interest rate is 7.5 percent,then the present value of the $500 is

• A)$411.26 if the $500 is to be received in 5 years and $338.95 if the $500 is to be received in 10 years.
• B)$348.28 if the $500 is to be received in 5 years and $242.60 if the $500 is to be received in 10 years.
• C)$291.11 if the $500 is to be received in 5 years and $272.89 if the $500 is to be received in 10 years.
• D)$291.11 if the $500 is to be received in 5 years and $236.49 if the $500 is to be received in 10 years.

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Definitions:

Payback Period

The duration of time it takes for an investment to generate an amount of income or cash flow equal to the cost of the investment.

Salvage Value

The estimated residual value of an asset at the end of its useful life.

Old Equipment

Refers to machinery or technology that has become outdated or has surpassed its effective service life but may still be in use.

Salvage Value

The projected remaining worth of an asset once it has reached the end of its operational lifespan.