Dodd Company Is Considering an Investment, Which Will Return a Lump

question 244

Multiple Choice

Dodd Company is considering an investment, which will return a lump sum of $675,000 four years from now. Below is some of the time value of money information that Dodd has compiled that might help in planning compounded interest decisions. $\begin{array}{ll}\text { Present value of } 1 \text { for } 4 \text { periods at } 10 \% & 0.68301 \\\text { Future value of } 1 \text { for } 4 \text { periods at } 10 \% & 1.46410 \\\text { Present value of an annuity of } 1 \text { for } 4 \text { periods at } 10 \% & 3.16986 \\\text { Future value of an annuity of } 1 \text { for } 4 \text { periods at } 10 \% & 4.64100\end{array}$ To the closest dollar, what amount should Dodd Company pay for this investment to earn a 10% return?

• A) $405,000
• B) $270,000
• C) $461,032
• D) $534,914

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Definitions:

National Debt

The total amount of money that a country's government has borrowed by various means, including foreign governments and private investors.

Future Generations

The forthcoming populations that will live on Earth in the future, whose interests are considered in sustainable development and environmental conservation.

Debt Service

The cash required to cover the repayment of interest and principal on a debt for a particular period.

Biennial Budgets

Budgets that are planned and approved for a two-year period, often used by governments to manage finances and resources more efficiently.