Use the Following to Answer Question

question 63

Multiple Choice

Use the following to answer question:
Table 14.1
Time Period (years)
Cash Flow
0
$800
1
200
2
200
3
200
-(Table 14.1) At a 7% annual interest rate, what is the present discounted value of the cash flows?

• A) $1,688.08
• B) $1,324.86
• C) $1,275.33
• D) $1,109.70

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Definitions:

Collection Time

The typical period it takes for a company to receive payments due from its clients.

Lockbox System

A service provided by banks to companies for the collection of payments from customers, involving the use of a special address (PO Box) where customers send their payments.

Treasury Bills

Short-term U.S. government debt obligations with a maturity of one year or less, considered a safe and liquid investment.

Anticipated Daily Savings

Expected savings that are calculated based on daily expenditures, often used in budgeting and financial planning.