Mary Will Receive $12,000 Per Year for the Next 10

question 16

Multiple Choice

Mary will receive $12,000 per year for the next 10 years as royalty for her work on a finance book.What is the present value of her royalty income if the opportunity cost is 12 percent?

• A) $67,800
• B) $38,640
• C) $120,000
• D) none of the above

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Definitions:

Pre-tax Cost Reduction

A reduction in expenses that occurs before taxes have been applied, aimed at improving a company's profitability.

Tax Bracket

A range of income amounts that are taxed at a particular rate. Tax brackets result in higher income being taxed at higher rates.

Land

A resource that refers to the natural area or earth's surface, including any resources over or under it, that is used for various purposes like agriculture, building, or recreation.

Depreciated

Refers to the reduction in the value of an asset over time due to wear and tear or obsolescence.