Cheryl Peck Purchased a Computer Network for Her Classroom

question 74

Multiple Choice

Cheryl Peck purchased a computer network for her classroom. The computer network cost $100,000. She estimates that she can charge $500 for one session in the classroom. Cheryl knows that enrollment will increase over time. She estimates 50 students the first year, 75 students the second year, 100 students the third year, and 150 students the fourth year. If her cost of capital is 16 percent, what is the approximate present value of the benefits?

• A) $122,881
• B) $135,471
• C) $187,500
• D) $119,156

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Definitions:

Net Income

The final financial gain of a business after removing all expenses, taxes, and costs from the gross income.

Financing Activities

Transactions and events whereby resources are obtained from, or repaid to, owners (equity financing) and creditors (debt financing).

Equity Accounts

Accounts that represent the owner's claim or interest in the assets of a business, reflected in the equity section of the balance sheet.

Operating Activities

The day-to-day actions that are involved in running a business, which are reflected in the cash flows from operating activities section of the cash flow statement.