The Procedure Used to Compute the Present Value of a Series

question 8

Multiple Choice

The procedure used to compute the present value of a series of cash flows is known as:

• A) compounding.
• B) the annuity method.
• C) discounting.
• D) the present-cost approach.
• E) indexing.

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Definitions:

Economic Grounds

The basis for decisions or actions taken to improve financial conditions or stability.

Cost-Benefit Analysis

A methodical strategy for assessing the advantages and disadvantages of various options to identify the most effective method for realizing benefits while conserving resources.

Marginal Cost

The extra cost incurred by producing one more unit of a product or service.

Marginal Benefit

The extra value or contentment obtained when one more unit of a good or service is consumed or produced.