The Solution to This Problem Requires Time Value of Money

question 172

Multiple Choice

The solution to this problem requires time value of money calculations. Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. If you must calculate the present value of an amount at 8% compounded quarterly for 2 years, then the interest factor used in the calculation is

• A) 2% for eight periods
• B) twice that for one period at 8% multiplied by 2
• C) 8% for two periods
• D) the interest factor for 8% for two periods divided by 4

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Definitions:

Contribution Margin Ratio

The percentage of sales revenue that exceeds variable costs, indicating the portion available to cover fixed costs and generate profit.

Operating Income

Income generated from a company's ongoing, core business operations, excluding deductions of interest and taxes.

Variable Costs

Costs that vary directly with the level of production or business activity.

Income From Operations

Income From Operations is the profit realized from a business's operational activities, excluding any investment income or taxes.